Energy Market Updates

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.

 Who said you cant triple stamp a double stamp? In an effort to restart ship traffic through the Strait of Hormuz, the US has begun a blockade of any ships going to or out of Iranian ports. Also attempting to secure passage for all other vessels. Effectively showing Iran they won't be able to fire upon vessels moving through the tight passage. Depending upon which news outlet you listen to, it appears to be working. Those countries who depend on Iranian product like China and India, are now forced into the discussions on some type of resolution.

It has been hard to find any good news in the fuel industry lately. Add to that a Texas refinery fire that put offline a 2m gallon per day diesel unit on Tuesday which halted the market sell off seen the day before. The Market is now tasked with trying to identify how much of the 15 point plan to peace is attainable, valid, or even received by Iran. It is largely held that there may be several factions seeking control in Iran, making it difficult to achieve any type of agreements. As some ships start to trickle through the Strait of Hormuz, it still may be a while until we see any type of normalized traffic, as I am guessing it will turn into a fee based passage system. They should put some of those gantry systems like on the Mass Pike!

As we wind down the third week of this armed conflict with Iran, fuel markets continue to soar higher, now roughly $2.00 per gallon higher on distillates. Recent increases come on the fear of the conflict spreading to other nations, and the stalled reopening of the Strait of Hormuz.

It is amazing that with over 25 years in this industry you can still see something new. Monday brought the most volatile day on record for diesel futures. The trading range from low to high was over $1.20…. in one day! Tuesday and Wednesday saw ranges of over $.50! As we stand right now, pricing is roughly $1.50 higher since the Iranian conflict started. Again, the US doesn’t have a supply problem, but because oil commodities are a world basket of pricing, the shipping bottleneck around the Straits of Hormuz is causing the increases. Releasing oil reserves, while largely symbolic, will take 3 to 4 weeks to hit markets. The only cure is to get vessels moving again. The Saudis are at max capacity of their Petroline, an east-west pipeline to the red sea, unfortunately it brings back into play the Houthis attacks around the Yemen coast.

Well, That escalated quickly. Since news broke early Saturday morning of the joint US-Israeli strike on Iran, ULSD futures are up over $1.00 and Gasoline is up roughly $.35. Everyone has asked why ULSD much more than Gasoline. The partial answer is three-fold.

Gasoline spiked this morning, after a refinery explosion shook Southern Philadelphia. At around 4am, a butane vat exploded at the East Coast's largest  refinery, causing large fires and prompting an shelter in place order for the surrounding areas. There are no injuries reported, and CNBC is reporting the flames were relatively controlled with the SIP order lifted around 7am. You can follow this story here: Massive explosion at biggest gas refinery in East Coast 

So much for no major events on the horizon.. After yesterday's drop, where Crude closed out at a 5 month low, this morning the NYMEX was up sharply across the board on developing news of tanker attacks in the Gulf of Oman.