Written Commentary
CRUDE OIL
Iran attacked energy facilities today across the Middle East overnight in retaliation for Israel striking Iran’s South Pars gas field on Wednesday. May WTI was higher but inside yesterday’s range and well off of the March 9 high, but nearby Brent reached 119.13 overnight, just shy of its previous high from March 9 at 119.50, and the June contract reached a new contract high. Middle East benchmark Dubai and Oman premiums hit all-time highs on at about $65 per barrel, according to trade sources and Reuters data. Iran’s attacks overnight included the world’s largest gas plant in Qatar and a refinery in Saudi Arabia, and other attacks sparked fires at two Kuwaiti refineries and forced the UAE to shut gas facilities.
PRODUCTS
Product prices reached new contract highs overnight despite the relative sluggishness of WTI. US refiners are more dependent on imports of heavy crude, thus putting them at the mercy of the global market more than US crude oil. Yesterday’s EIA report showed larger than expected declines in gasoline and distillate stocks last week. Reuters reports that the Trump administration is expected to announce soon that it will temporarily lift federal smog-cutting restrictions on summer-blend gasoline to curb rising prices. The move would make standard gasoline cheaper by not forcing refiners and retailers to switch to more costly summer blends of gasoline, while also allowing fuel retailers to continue selling gasoline blended with 15% ethanol, known as E15, throughout the summer driving season when stricter rules normally limit its use in much of the country.
NATURAL GAS
London Natural Gas was sharply higher overnight after Iran attacked the world’s largest LNG facility in Qatar, while US prices saw some mild support that took the market to its highest level since Friday. US LNG exports are near capacity, and this US market is insulated from the global marketplace. World Weather Inc said record breaking heat is expected over the western US for the next several days, and this could boost power consumption for air conditioners. Highs over 100 Fahrenheit are expect for a part of the southwestern U.S. Plains (including hard red winter wheat areas from southwestern Oklahoma into West Texas) Friday into Saturday. The 6-10 and 8-14 day forecasts show above normal temperatures across most of the lower 48, excepts for some normal and below normal around the Great Lakes and the Northeast, presenting a mixed demand view.
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