Bank of America Warns Energy Markets Face Severe Supply Shortfalls

Francisco Blanch, head of commodities and derivatives research at Bank of America, noted that while crude supplies remain adequate for the moment, the refining sector is buckling. Diesel crack spreads have surged to between $80 and $85 per barrel, pushing the cost of the fuel differential above the price of WTI crude. This anomaly, coupled with record-high refining margins for gasoline, signals deep instability in end-product availability.

The bank’s warning coincides with a broader shift in investment strategy. Chief investment strategist Michael Hartnett is advising clients to adopt a defensive posture as the firm’s bull-and-bear indicator hits its highest level since 2021. With inventories significantly lower than during previous supply shocks, any failure to normalize tanker traffic through the Strait of Hormuz risks triggering an inflationary surge. Investors are currently being urged to reduce exposure to risk assets, as high U.S. equity valuations leave the market vulnerable to a potential energy-driven economic spillover.