US Looking at Options to Reopen The Straight

CRUDE OIL

May Crude Oil was in the lower half of Thursday’s range early Friday and was within the trading range of the past several sessions. Britain, France, Germany, Italy, the Netherlands and Japan issued a joint statement on Thursday saying they were ready to join appropriate efforts to ensure safe passage through the Strait of Hormuz and would take steps to stabilize energy markets. The statement was light on the details focusing on “why” with nothing on “how.” Israel and Iran launched new attacks on each other overnight, but at the time of this writing it did not appear that they were attacking oil infrastructure around the Persian Gulf. This leaves the market weighing the ongoing attacks by the belligerents in the Mideast against some hope of opening the straight. US Treasury Secretary Scott Bessent suggested that the US may soon remove sanctions from Iranian oil stranded on tankers, which appears to be a reward to Iran for closing the Strait.

PRODUCTS

US product prices are outpacing crude oil prices because many of the US refineries require sour crude as opposed to the type of light crude that is produced in the US. In the past, the US relied on Venezuela for sour crude, but that supply has diminished in recent years as Venezuela output has fallen, leaving Middle Eastern oil as the next source. The benchmark Mars sour produced in the Gulf of Mexico, a similar quality to oil produced in the Middle East, has Sour reached $107.53 on March 9, highest since July 2008, and on Thursday it traded at a premium of about $6 to US crude.

NATURAL GAS

Natural gas prices were lower early Friday as the market took a breather following rallies yesterday from the attack on a key LNG facility in the Persian Guld. QatarEnergy said the attacks could take three to five years to repair. London gas prices soared on Thursday in reaction to the strike, but US prices only drew mild support because the US is self sufficient on gas supply and its LNG exports are already near maximum capability. The EIA gas storage report on Thursday showed a net injection of 35 billion cubic feet into US gas supply for the week to 1,883 bcf versus an average trade expectation of +31.

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