Assessing War And Peace

CRUDE OIL

Crude oil was higher early Thursday, as the market turned less optimistic about the chances for an end to the Iran war. The relief that came in the wake of the Trump announcement from Monday has faded, and the trade is taking into account how difficult it will be for the US and Iran come to an agreement and for the reopening of the Strait of Hormuz. An Iranian embassy official in Islamabad did say talks in Islamabad between the US and Iran were still on the table and Pakistan was the preferred destination, but both sides remain far apart on their demands. In the meantime, the US military is planning to send airborne troops to the Gulf on top of two contingents of Marines already on their way, which raises the possibility of a potential ground assault. A

PRODUCTS

Key reversals in May RBOB and May ULSD this week suggest tops are in, but the volume did not appear large enough to give those indicators much veracity, and so much rides on the Iran war and whether the Strait of Hormu can be reopened. The Trump administration announced on Wednesday that it will temporarily suspend federal anti-smog regulations on seasonal gasoline blends and allow retailers to sell formulations of gasoline including blends with 15% ethanol, that are typically not permitted during warmer months. The waiver takes effect for 20 days starting May 1, and can be extended if needed, the agency said.

NATURAL GAS

May US Natural Gas is not garnering much support from the Iran war, as US LNG exports are already close to capacity,  and US domestic supplies are ample. A new LNG plants is are expected to come on line next month, which will help on the margins, and more plants are underway, but it will not have an immediate effect on US supply. So far for March, LSEG is estimating average gas flows to the nine big US LNG export plants at 18.5 bcfd versus the record 18.7 bcfd in February. They put average gas output in the US lower 48 states at 109.6 billion cubic feet per day so far this month, up from 109.2 bcfd in February but short of the record 110.6 bcfd from December.

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