Written Commentary
CRUDE OIL
September Crude Oil was higher early Monday but did had not made it through last week’s highs, as the traded seemed less alarmed with Iran’s threats to close of the Strait of Hormuz despite the increased hostilities between Iran and the US over the weekend. Iran’s Revolutionary Guards said on Monday they had targeted US military facilities in Bahrain and Kuwait, destroyed radar systems in Oman, and hit fuel tanks and ammunition depots at Prince Hassan Air Base in Jordan in response to US strikes. The US military said it had struck Iranian air defense systems, coastal radar sites, missile and drone capabilities and small boats on Sunday, using aircraft, naval vessels and drones.
PRODUCTS
Product prices were higher early Monday but like crude oil were short of last week’s highs despite the increased hostilities between the US and Iran. IEA said refining activity and oil product shipments were slower to react to the reopening of Hormuz than crude oil exports, and this has tightened the market for refined fuels and pushed up refining profit margins, including gasoline and diesel. Russia suspending diesel exports in the wake of Ukrainian attacks on refining facilities also contributes to supply tightness.
NATURAL GAS
September Natural Gas fell below Friday’s lows early Monday, extending last week’s selloff to its lowest level in almost five year. The US is experiencing some very hot weather this week, but the 6-10 and 8-14 day maps are less consistently hots than they have been, with some normal temps from the eastern Midwest to the New England/mid-Atlantic. The market is still reeling from last week’s news of the chance of increased flows to the henry Hub, reduced LNG offtake, and larger than normal increased in US storage. This included the Natural Gas Pipeline Company of America removing transportation restrictions for fuel moving through East Texas and southwest Louisiana, which will allow more supply to flow to the benchmark physical gas contract in Erath, Louisiana (the location of the Henry Hub), among others. The Freeport LNG export terminal in Texas was to start “major maintenance turnaround work” on July 10, which is expected to trap more supply within the domestic market.
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