Israel Planning to Strike Iranian Nuclear Facilities?

CRUDE OIL

Israel Planning to Strike Iranian Nuclear Facilities?

The crude oil market was sharply higher overnight on reports that, according to US intelligence, Israel was preparing to strike Iranian nuclear facilities. This is quite a contrast from a week ago, when optimistic reports on US/Iran nuclear talks seemed to be opening the door for Iranian crude to reach the global market. The situation had already taken on a darker tone this week, with Iran and US at odds over uranium enrichment. There are also concerns that Iran could retaliate by blocking oil tanker flows through the Strait of Hormuz. The API report yesterday afternoon came in bearish for crude oil, but the Israel/Iran news took center stage. The report showed crude oil stocks were +2.5 million barrels in the week ended May 16 versus expectation calling for -1.3 million. Gasoline stocks were -3.2 million versus +800,000 expected, and distillates were -1.4 million, which was right on the average expectation. The EIA report will be released this morning. The EU adopted four sets of sanctions against Russia on Tuesday, including a 17th package targeting Moscow’s shadow fleet, but it does not have buy-in from the Trump administration. Ukraine wants G7 nations to reduce their price cap on Russian seaborne oil to $30 per barrel from the current $60 cap.

 PRODUCTS

The API report showed US gasoline stocks were -3.2 million versus +800,000 expected, and distillates were -1.4 million, which was right on the average expectation.

NATURAL GAS

July Natural Gas eased back overnight after a two-day recovery bounce. LSEG said yesterday that average gas output in the lower 48 states fell to 103.9 billion cubic feet per day so far in May, down from a monthly record of 105.8 bcfd in April. On a daily basis, production was on track to fall to a preliminary one-week low of 103.4 bcfd on Tuesday, down from 104.7 bcfd on Monday and an average of 104.1 over the prior seven days. The decline was attributed to increased maintenance. LSEG forecast average gas demand in the lower 48 to drop to 95.1 bcfd next week from 98.8 this week, but the forecast for next week was higher than the forecast on Monday. The average amount of gas flowing to the eight big LNG facilities in the lower 48 fell to 15.1 bcfd so far in May, down from a monthly record of 16.0 in April. The CEO of Woodside Energy, Australia’s top natural gas producer, said they expect global LNG demand to increase by 50% by 2030. For the EIA gas storage report this week, the early Reuters poll has range of expectations calling for US supply to show a net injection of 108 to 120 bcf last week.

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