Written Commentary
CRUDE OIL
September Crude Oil held Tuesday’s gains early Wednesday but had not made new highs. Gasoline and diesel did make new highs for the move early Wednesday, as the global supply situation remains tighter for the products, especially with the interruptions to Russian output in the wake of Ukrainian attacks on the refineries. September ULSD has reached new contract highs, and the 3:2:1 crack spread has reached all-time highs. Iran’s threat to close “all other export corridors that benefit the U.S. and its allies” implies they plan to use their Houthi allies to block the Bab el-Mandeb gateway from the Gulf of Aden to the Red Sea, which is other the major outlet for Mideast crude to Asia.
PRODUCTS
US product prices extended their rallies early Wednesday, and September ULSD reached new contract highs. These markets being supported by round of blockages in the Strait of Hormuz and by the reduced availability of Russian supply. Russia has had to suspend diesel exports in the wake of Ukrainian attacks on oil refineries, and their gasoline supplies are short as well. US exports have soared, and US supplies of gasoline and distillates (as well as crude oil) are hovering near six-year lows for this point of the season.
NATURAL GAS
September Natural Gas is hovering near the lows it put in last Friday. This is happening despite sharply higher gas prices in Europe that have come with the recent closure of the Strait of Hormuz, as there is only so much LNG the US can export. The 6-10 and 8-14 day forecasts show below normal temperatures covering much of the Midwest, the Great Lakes to the eastern seaboard from New England to Virginia. The rest of the lower 48 states show mostly above normal temperatures, but this is a cooler outlook overall than earlier this week, and it reduces the possibility of a surge in cooling demand.
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