Written Commentary
CRUDE OIL
With a major rally to start the new trading week it is very clear that the world perceives a dramatic extension of Middle East shipping delays. In fact, recent events have escalated the prospect of oil production/export setbacks among Iranian neighbors as Iran has threatened to attack port facilities in the region if the US blockades it supports. In other words, in addition to the delay of supply from a blocking of transport, damage to export facilities in Qatar, Iraq, UAE, and perhaps even Saudi Arabia could impound supply flow for an indeterminate amount of time. Adding into the bullish vibe is all-time record high European crude prices near $150 per barrel which in turn shows supply anxieties are through the roof. Bullishness is so pervasive this morning that an increase in Russian seaborne oil product exports last month is all but discounted as is a projected 48% increase in CPC March oil exports from February. Following Friday’s downbeat finish, crude oil has quickly regained upside momentum with a gap-higher open to start out today’s action. US/Iran negotiations in Pakistan over the weekend were unable to reach an agreement to end the Persian Gulf conflict, with the two sides remaining far apart on nuclear issues. Many financial markets were embracing the prospect of a sustained ceasefire, which contributed to the severity of today’s positive turnaround in crude oil and product prices. The additional announcement of a US “blockade” of vessels that travel through the Strait of Hormuz to arrive at and are leaving from Iranian ports on the Persian Gulf added to risk anxiety early this week, as this action would apply mainly to vessels carrying (or expecting to carry) Iranian crude oil. China has been a customer of Iran’s crude oil exports, so it may become an interested party in upcoming US-Iran talks, which may take place again by the end of this week. Israel committed to the Persian Gulf ceasefire over the weekend, which deflated risk premiums, as that issue had been a sticking point for Iran to move forward with negotiations. According to some reports, over 600 vessels remain stranded in the Persian Gulf, while crude oil supertanker charter rates have quadrupled from early March.
PRODUCTS
Both product markets have turned sharply to the upside today, and while RBOB saw a gap-higher opening, ULSD has returned to being the strongest member of the petroleum complex. With tanker traffic out of the Persian Gulf likely to remain highly restricted, refineries in Asia (and increasingly in Europe) are having to reduce their operations. Jet fuel and shipping fuel oil have been the distillates most affected by reduced Middle East crude oil outflows, but product supply throughout the Eastern Hemisphere has been tightening, which will continue to underpin ULSD and RBOB prices.
NATURAL GAS
Natural gas prices were able to rebound from Friday’s 2026 low with moderate gains early in today’s trading, but they remain firmly at the bottom of their March/April downtrend. The latest 8 to 14-day forecast calls for above-normal temperatures across large portions of the lower 48 states, which will reduce power plant demand for natural gas over that timeframe. Qatar’s LNG exports have been shut off for seven weeks, and their output has been sharply reduced due to damage to their production facilities, and that continues to underpin natural gas prices. However, the seasonal shift towards milder weather across the Northern Hemisphere has reduced the impact of the Qatari supply bottleneck on global LNG near-term supply as natural gas storage normally increases during the second quarter.
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