Brent: Diesel signals higher prices – Societe Generale

Societe Generale analysts Michael Haigh and Jeremy Sellem highlight a sharp divergence between physical Brent and futures, with Dated Brent trading at a substantial premium. They note that Diesel strength implies Brent should be above $150/bbl to restore historical refining economics. The report stresses that prompt crude scarcity is intensifying as product tightness deepens.

Physical premiums and diesel signals

"Brent crude recently climbed to almost $110/bbl as geopolitical risks intensified following attacks on Saudi energy infrastructure on September 10. As 10-year Treasury yields breached 5%, Trump's priorities increasingly shifted from geopolitical pressure to economic stability and attempted to talk down the oil prices implying there was progress being made to end the war."

"The most striking feature of today's oil market is not the outright level of Brent, but the divergence between physical and financial crude prices. Since 2017, the Dated Brent premium has generally fluctuated around zero, with only temporary spikes during major supply disruptions. In September 2026, however, the premium surged above $20/bbl, reaching one of its highest levels of the last decade."

"The divergence accelerated sharply during the summer. Between early August and mid-September, Dated Brent rose from roughly $92/bbl to $127/bbl, while front-month Brent increased from approximately $89/bbl to $105/bbl. As a result, the premium expanded from around $3.5/bbl in August to more than $21/bbl today."

"In practical terms, this means the crude price paid by refiners is materially higher than the headline Brent price displayed on financial screens. The market is assigning a growing premium to immediate physical availability, a classic sign of tightening prompt balances."

"Based on the historical relationship though, we estimate that Brent should be trading above $150/bbl to be consistent with the traditional economics of the refining business. We argue that the restoration of this relationship has been a major driver of the recent catch-up in crude prices relative to products, and that the longer the conflict lasts, the more crude scarcity will converge with the diesel scarcity already priced into the market."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)