Written Commentary
CRUDE OIL
August Crude Oil made a new high for the move yesterday but backed off those levels after President Trump said that he would decide whether the US gets involved in the conflict in the next two weeks. Iran said today that it would not discuss its nuclear program while under attack by Israel. Both sides of the conflict continued their attacks yesterday, with Israel targeting nuclear sites and Iran firing missiles and drones at Israel, and Israel’s military said it had carried out new strikes on dozens of military targets in Iran overnight. In the back of traders’ minds is the possibility that Iran or some other actor may try to block the Strait of Hormuz, through which some 20% of global exports flow. Reuters reports that Iran is maintaining crude oil output by loading tankers one at a time and presumably moving them through the Strait. They are also moving their floating storage closer to China.
NATURAL GAS
August Natural Gas pushed thorough the May high this morning to its highest level since April 7. The market took a bullish turn this week after Israel bombed facilities at an Iranian gas field which bought the Iran/Israel war to the attention of the gas market for the first time. There are concerns that passage through the Strait of Hormuz will be interrupted. Qatar uses that field as well, and Qatar Energy has instructed tankers to remain outside the Strait and to enter the Gulf only the day before loading after Israel hit Iranian facilities. The EIA report on Wednesday showed a net injection of 95 bcf for the week ending June 13, which was blow the average expectation of +98 but still above the five year average for the week at +68. Storage was down -8.0% from a year ago and 5.6% above the five-year average versus -9.0% and +4.8% the previous week. Warmer than normal weather is expected across much of the lower 48 states over the next couple of weeks.
PRODUCTS
Gasoline and diesel prices both reached new highs for the move yesterday as they drew support from concerns over supply from the Middle East, but they backed off in the wake of the statement from the Trump Administration that the decision regarding US involvement in the Israel/Iran conflict would come in two weeks. Diesel prices have been especially strong, with August ULSD reaching its highest level since January 2023 yesterday . According to the analytics firm Kpler, the Middle East represented 17% of global diesel seaborne imports in 2024, mostly from Kuwait and the United Arab Emirates (via the Persian Gulf) and Saudi Arabia (via the Persian Gulf and Red Sea).
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