Written Commentary
CRUDE OIL
The lack of upside follow through in crude oil after in the wake of the resumption in hostilities between Iran and the US indicates less concern about the state of crude oil flows out of the Persian Gulf. Prior to this week’s events, flows through the Strait of Hormuz had reached 80% of pre-war levels and that most of the tankers that had been blocked had passed through the strait and were on the way to their destinations. This will provide a boost in supply in the near-term, though the long-term resumption of normal flows remains in question. Putting this week’s developments aside for a moment, the need to rebuild strategic supplies in Europe, US and Asia should provide buying support over once flows return to any sense of normalcy. Iran launched attacks on US military infrastructure in Gulf states on Thursday after US struck Iran’s southern coastal and eastern provinces.
PRODUCTS
September product markets fell back on Thursday following their sharp rallies earlier this week. Product markets are supported by tight global supplies that will take longer to replenish than crude oil. The US has been the supplier of last resort through this crises, which is reflected in those tight stock levels. Russia’s banning diesel exports adds additional tightness to global supply.
NATURAL GAS
September Natural Gas was lower early Friday following a sharp sell-off Thursday on news of increased gas flows to the Henry Hub, the possibility of reduced flows to LNG export plants over the near term, and a larger than expected US supply build last week. The Natural Gas Pipeline Company of America has removed 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. This means boosted supply to the main deliverable point for the CME futures contract.
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