April Crude Oil Near The Week’s Highs

CRUDE OIL

April Crude Oil was higher early Thursday and near the week’s highs. Shipping through the Strait of Hormuz has essentially come to a halt, stranding about 20% of global oil supply. There US/Israeli attacks on Iran continues, as do responses by Iran that have reached several nations in the region, and at this point it appears the US and Israel expect the attacks to continue for weeks. Reuters reported that an estimated 300 oil tankers were inside the Strait, according to ship tracking data from Vortexa and Kpler that excludes some of the smallest tankers and that at least 200 ships, including oil and liquefied natural gas tankers as well as cargo ships, remained at anchor in open waters off the coast of major Gulf producers, based on ship-tracking data from the MarineTraffic platform. Iranian forces have struck oil tankers in or near the Strait of Hormuz.

PRODUCTS

Product prices both went to new contract highs early Thursday, as the war’s effects show up in diesel and gasoline supplies. European diesel futures reached their highest level since October 2022 at $1,130. Average US diesel prices surpassed $4 a gallon for the first time in nearly two years on Wednesday, according to market tracker GasBuddy data. The disruption of Middle East crude oil also disproportionately affects distillate supplies because crude oil from the region tends to be more distillate-rich. Militaries tend to use more distillates than gasoline. The ULSD/RBOB spread has reached its highest level since October 2023.

NATURAL GAS

May Natural Gas was slightly higher early Thursday but inside Wednesday’s lower action.  The market rallied on Monday after QatarEnergy had announced it was halting LNG production due the closure of the Strait of Hormuz. It could take a month for them to get back to full export capacity once they restart. For the EIA gas storage report today, the Reuters poll has an average expectation calling for a net withdrawal of 121 billion cubic feet for the week ending February 27 (range -50 to -133). The five-year average changes for the week is -85 bcf.

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