Selloff on Possible US-Iran Agreement

CRUDE OIL

July Crude Oil is lower this morning on reports that the US and Iran are close to a deal regarding their nuclear program. An agreement could result in the US lifting the sanctions on Iran, which would open up Iranian crude supply to the global market. President Donald Trump said yesterday that the United States was getting very close to securing a deal, and Iranian official said Iran could a great to a deal with the US in exchange for the lifting of sanctions. The International Energy Agency said today that economic headwinds and record sales of electric vehicles will reduce global oil demand growth to 650,000 barrels per day for the remainder of 2025 from the 990,000 bpd in the first quarter. In April, OPEC+ production fell 106,000 bpd to 40.92 million, thanks in part to a 41,000 bpd drop for Kazakhstan. Iran, Libya and Nigeria also reduced output. The group was scheduled to raise output in April, and in May and June by more than originally planned as part of a plan to unwind its most recent layer of quotas, but this was apparently mitigated by new-found discipline on the part of some producers. Estonia said overnight that a Russian a military jet entered NATO airspace after Estonia attempted to intercept a Russian-bound oil tanker thought to be part of a “shadow fleet” defying Western sanctions. Yesterday’s EIA report mostly confirmed the API report from Tuesday in that US crude oil stocks increased last week, counter to expectations for a decline and gasoline and distillate stocks came in at the bullish end of expectations. Crude oil and gasoline stocks remain below average levels, and distillate stocks are at six-year lows.

PRODUCT MARKETS

EIA stocks came in at the bullish end of expectations, which supports the crack spreads, but the possibility of a US/Iran agreement pressures the markets overall.

NATURAL GAS

July Natural Gas extended this week’s selloff overnight but is back near unchanged this morning. The steep selloff in crude oil can be a bullish for natural gas, as lower crude oil prices could pressure US crude production, which pull natural gas output down as well. For the EIA report today, the Reuters poll of analysts has an average expectation for US natural gas storage to show a net injection of 109 bcf last week (range +102 to +114). The five-year average change for the week is +87 bcf. As of last week’s report, storage was -16.5% from a year ago but 0.9% above the five-year average. This was the first time it was back above the average since late January. LSEG said average gas output in the lower 48 US states fell to 103.7 billion cubic feet per day so far in May, down from a monthly record of 105.8 billion in April. Hot weather in Texas could support cooling demand. LSEG reports that the average amount of gas flowing to the eight big LNG export plants in the  US have fallen to 15.1 bcfd so far in May, down from a record 16.0 bcfd in April, due to maintenance. Natural gas prices could find support if crude prices collapse the possible Iran/US agreement.

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