Apparently the Strait of Hormuz is operating on Bankers hours this week. After a promising $.45 drop on Friday, the reaction to the news has now seen futures take back all of the loss and then some.
We might be starting to see some demand destruction due to high pricing for the end users, as reported in this weeks inventory figures. Gasoline and Jet Fuel in particular showed larger drops in consumption which may indicate changes in people’s daily travel habits as well as a lack of airline business, which can be largely discretionary.
As we sit currently in a ceasefire stalemate with Iran, and ship traffic essentially closed, it will be tough to pinpoint a time when we return to normal pricing. Domestically, inventories of crude and finished products remain healthy. It may result in a period of time where physical diesel and gasoline in the US is less than futures, sounds crazy but it has happened. Even if full traffic started today, the catch up period throughout the world would take some time and a return to normal price levels would also need some time.
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