Crude Lower in Wake of Cease Fire

CRUDE OIL

August Crude Oil is lower this morning following yesterday’s key reversal an in the wake of an announced cease fire between Israel and Iran which both have agreed to but remains uncertain. Iran did launch a missile on Israel overnight and Israel said it would respond, but now it appears they have backed off in the wake a scolding from President Trump. Clearly the market was relieved Iran did not make a move to block the Strait of Hormuz and that oil flows have not been interrupted. Iran has an interest in keeping is oil exports to China, India and other Asian customers flowing. The peace may be fragile, but the anxiety levels are down.

NATURAL GAS

August Natural Gas extended yesterday’s selloff overnight but found support at the 200-day moving average. The market has likely seen some pressure from the tentative cease fire between Israel and Iran and the fact that Iran did not attempt to block the Strait of Hormuz, leaving LNG production by UAE and Iran able to flow from the Persian Gulf. A heat wave over the US has provided a boost to cooling demand, which may allow US storage gains to slow in the next couple of weeks. The forecast has turned milder relative to yesterday at this time, with the 8-14 day showing a broad swath of near normal temperatures covering the southern Plains, the Midwest, Great Lakes, and the northern half of the Atlantic Coast.

PRODUCTS

Both products had major reversals lower yesterday after the worst fears from the Israel/Iran conflict were not realized. Iran did not attempt to block the Strait of Hormuz and a tentative cease fire appears to be holding. The Commitments of Traders Report showed managed money traders were net buyers of 382 contracts of RBOB for the week ending June 17, increasing their net long to 20,790 but which is historically low. For ULSD, managed money traders were net sellers of 2,774 contracts, reducing their net long to 12,787, also historically low. The trade is expecting only minor changes in US supply this week, with the early Reuters poll calling for no change in gasoline stocks and a 500,000 barrel increase in distillates. As of last week’s report, US gasoline stocks at 230.0 million barrels were the down slightly from 231.2 million the previous year and a five year average of 234.3 million. Distillate stocks at 109.4 million were down from 121.6 million the previous and the lowest for this point in the season in at least five years.

 Interested in more futures markets?  Explore our Market Dashboards here.