Written Commentary
CRUDE OIL
August Crude Oil was sharply higher overnight in the wake of Israel’s attacks on Iran. Nearby prices reached their highest levels since January. The market is well off its overnight highs but remains volatile as the situation is fluid. One question is whether Iran or some other actor would block the Straits of Hormuz, through which 20% of the world’s oil passes. Iran may be reluctant to do so since the need the straits open for their own exports. Nearly all Iranian exports going to China, so Chinese discounted purchases would be most at risk. It is possible the market has put in an exhaustion top, but with Israel indicating that their mission could take several days and the world awaiting Iran’s response, expect more volatility ahead.
NATURAL GAS
August Natural Gas was higher overnight but inside this week’s range. Unlike crude oil, global gas supply is not threatened by a potential closing of the Straits of Hormuz. Yesterday’s EIA Gas report showed a net injection of 109 bcf last week, which was very close to the average trade expectation of +108. Storage was down 9.0% from a year ago and 4.8% above the five-year average versus -10.4% and +4.1% the previous week. The surplus from the five year average increased for the sixth straight week. Weekly injections has been above average since April, which has alleviated a tight supply that had developed last winter. The NWS forecasts show a warmer than normal trend over most of the lower 48 states for the next couple of weeks, which should boost electricity demand for natural gas.
PRODUCTS
The products are sharply higher as well in the wake of the Israel attack in Iran.
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