Written Commentary
CRUDE OIL
September Crude Oil was sharply higher early Wednesday as traders were confronted with the prospect of even more restrictions on global oil movement after news that least three oil tankers had made U-turns in the Red Sea and were heading towards the Suez Canal rather than attempting a southern passage through the strait at Bab el-Mandeb. These tankers were reportedly loaded with Saudi crude and were headed for China, and the diversion will add four weeks to the voyage. In recent months an average of 10 crude tankers per day have sailed through the Bab el-Mandeb, as Saudi Arabia diverted more of their output to the Red Sea as from the Persian Gulf. Adding further to supply constraints, the Caspian Pipeline Consortium has stopped receiving oil from Kazakhstan after suspending loadings on Monday due to attacks on oil tankers at its Black Sea terminal, three industry sources said.
PRODUCTS
September USLD traded to a new contract high early Wednesday, and September RBOB was closing in on its contract high from May. These markets are drawing support today from a rally in crude oil that has come in response to the Houthis attempt (and apparent success so far) at closing the southern exit out of the Red Sea, thus forcing ships with Saudi crude oil to take a longer route through the Suez Canal on their way to Asia. Product prices have rallied ahead of crude oil in recent weeks because the temporary reopening of the Strait of Hormuz weeks ago let out a lot of bottled up crude has yet to be refined. On top of that, Russia has been forced to curtail diesel exports and ration gasoline in the wake of Ukrainian drone attacks on Russian oil facilities.
NATURAL GAS
September Natural Gas was higher early Wednesday but remained inside last week’s range. There may have been some relief that Tropical Storm Bertha is weakening as it moves westward along or near the Gulf Coast bringing heavy rains not much wind damage. Gulf storms threaten gas demand, not supply, and this storm could reduce cooling demand in the short term and perhaps interrupt loadings at LNG terminals, but the potential for damage appears to be minimal so far. The storm is expected to reach the Texas coast Thursday night or Friday morning.
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