Monthly Archives: April 2026

Still Below $100/Barrel, But Possibly Not For Long

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Happy Friday!

It was a roller coaster week in oil markets, and it ended on an unexpected note of hope. A source in Pakistan said Iran’s top diplomat was expected to arrive in Islamabad Friday night for peace talks with the United States, and that single piece of news was enough to calm a market that had been beaten up all week by bad headlines. Oil prices swung sharply throughout the week, with WTI bouncing between the high $80s and low $90s a barrel, while Brent crude crossed $100 a barrel for the first time since the war began. The Strait of Hormuz is still closed, and one diplomatic meeting will not change that. But after a week of little good news, the market took what it could get heading into the weekend.

The ceasefire storyline was front and center all week. Monday started with the two-week pause in fighting set to expire and no deal to replace it. Iran’s president suggested both sides should explore every diplomatic option, which raised hopes. By Tuesday, there was real optimism that Iran and the U.S. would meet in Pakistan. They never showed up. On Wednesday, Iranian military boats fired on three cargo ships in the Strait, Iran’s Revolutionary Guards seized two more vessels, and the US also struck an Iranian cargo ship in the Indian Ocean.  President Trump announced he was extending the ceasefire indefinitely regardless. Oil prices jumped anyway, because traders understood the announcement for what it was: a ceasefire on paper while the waterway stays closed is not a solution to the supply problem. Then Friday brought more confusion: Iran released video of troops boarding a ship inside the Strait, prices spiked, and then the Pakistan peace talk news hit and pulled them back down. To put the Strait situation in perspective, only five ships passed through it in the past 24 hours. Before the war started on February 28, the daily average was 140. Hundreds of ships and around 20,000 sailors remain stuck inside the Persian Gulf with nowhere to go.

The U.S. government’s weekly EIA report, released Wednesday, painted a mixed picture of domestic supplies. The country’s crude oil stockpiles grew slightly and are in reasonably good shape. The problem is in the refined products that consumers actually use. Gasoline supplies fell and are now slightly below normal seasonal levels. Diesel supplies fell further and are now 8 percent below where they should be for this time of year — a real concern with spring planting season about to drive demand higher. Demand for jet fuel is running more than 6 percent below last year, which reflects airlines canceling routes they can no longer afford to fly. U.S. oil producers, despite making strong profits at current prices, are not rushing to drill more wells. The industry spent years convincing investors it would spend carefully, and that mindset does not change overnight even when prices are high.

On the policy front, President Trump extended the Jones Act, a rule waiver this week that allows foreign ships to carry oil and fuel between U.S. ports, pushing the extension through mid-August. The move helps keep domestic fuel supplies moving while the global disruption continues. In Europe, a major oil pipeline from Russia briefly came back online after months of being shut down, which was welcome news for some countries. At the same time, Germany lost access to a different oil supply through that same pipeline after Russia cut off Kazakhstan’s exports through the line. Europe’s energy situation remains complicated and fragile. Separately, Reuters reported that the Pentagon is considering suspending Spain from NATO, which, if it moves forward, could add yet another layer of uncertainty to energy security across Europe.

The Federal Reserve’s future took center stage in Washington this week as Kevin Warsh went before the Senate for his confirmation hearing to become the next Fed chair. He promised to act independently and gave no hints about where interest rates are headed, which was about what markets expected. Fed policy has a direct impact on energy prices since crude oil is traded in US Dollar.  More revealing was data showing that inflation in the United Kingdom rose to 3.3 percent in March, up from 3.0 percent in February — the first clear sign that the war’s impact on energy prices is showing up in everyday consumer costs overseas. Expect similar pressure to build in the U.S. in the months ahead. Airlines put the economic struggle in plain terms this week. Alaska Air said it cannot predict how bad its losses will be in the coming quarter because of fuel costs. American and United Airlines said the same thing. When the country’s largest airlines cannot plan their own businesses, that is a sign of just how much disruption the energy crisis is causing across the broader economy.

The Chicago-area fuel market held up relatively well this week, with local price differentials staying stable even as national crude prices swung wildly. That said, I expect both gasoline and diesel prices to move higher heading into next week. Farming season is almost here, and diesel demand is about to climb sharply. Without any progress on reopening the Strait, May could be a painful month at the pump for anyone running farm equipment. Diesel could easily push back above $5 a gallon if crude prices tick up or any supply hiccup occurs.

Propane is now following the crude oil trade.  After a long stretch of calm, prices are starting to drift higher as they begin to follow crude oil more closely. The good news is that a solid inventory build was reported nationally this week, and if that trend continues through spring, there is a reasonable chance prices soften slightly over the summer. Propane is still the most affordable energy option out there right now by a wide margin, and that has not changed. Summer fill opportunities remain available, and I would encourage customers to take advantage of them while they can. Watch the peace talks closely — any real progress toward reopening the Strait could pull crude prices lower and create a brief window to purchase propane at lower prices.

As always, if you have any questions please feel free to give us a call. Have a great weekend!

Best regards,

Jon Crawford

Sources: Bloomberg, Reuters, Wall Street Journal

Ceasefire With Iran For Now

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Happy Friday!

What a week. Crude oil markets went from bracing for military strikes on Iranian energy infrastructure, to celebrating a two-week ceasefire, and then right back to worrying about whether the deal will hold. After one of the most dramatic weeks in energy market history, WTI crude is heading into the weekend near $98 per barrel. The ceasefire stopped the bombing, but it has not reopened the Strait of Hormuz, and the physical supply picture remains extremely tight.

Markets reopened Monday after the Easter holiday with all eyes locked on the April 7 deadline that Trump had set for Iran to reopen the Strait or face strikes on its energy infrastructure. The physical oil market was already sending loud warning signals. Oil price backwardation rocketed above $10 per barrel, one of the most important signals in the market, telling you that buyers were paying a steep premium to get oil delivered immediately rather than wait. That level of backwardation reflects genuine tightness in the supply chain, not just trader speculation. No deal with Iran had been reached, and the situation heading into Tuesday was as uncertain as it had been at any point during the conflict.

Tuesday brought the moment of truth. Trump’s deadline expired at 8 p.m. ET with no agreement in place. The Strait remained closed, and both sides had received peace proposals but neither had accepted terms. Iran had achieved its most important strategic goal within the first days of the war which was closing the Strait through which roughly 20 percent of the world’s oil normally flows.  And there was no sign Tehran was ready to give that leverage up. Markets were cautious, with investors selling equity positions and buying oil as a hedge against further escalation.

Then came the dramatic turn on Wednesday. Less than 90 minutes before his own deadline expired, Trump announced a two-week ceasefire and suspended the threatened strikes on Iranian energy infrastructure. It was the most dramatic ultimatum of his presidency, and it ended, at least temporarily, with a pause in the fighting. Markets rallied sharply on the news and crude dropped hard immediately. However, I want to be clear about what the ceasefire does and does not change. It stops the bombing. That is significant. But it does not reopen the Strait of Hormuz. It does not repair damaged infrastructure across the region. It does not bring back the hundreds of tankers that have scattered around the globe. And it does not undo the inflation that has already worked its way into fuel, food, and freight costs. According to intelligence firms, there are currently 426 tankers carrying crude oil and clean fuels stuck inside the Persian Gulf alone. Getting all of that moving again is a massive logistical challenge even under the best conditions, and shipowners have made clear they will not send vessels back into the Gulf unless the two-week window is extended.  They simply do not trust the pause will hold.

The ceasefire optimism faded fast on Thursday. Trump allies and senior U.S. officials told reporters they were worried the president had moved too quickly, and Iran’s public posture that is insisting it holds the upper hand heading into talks made Washington uneasy. Iran published a 10-point list of demands that included keeping control of the Strait of Hormuz, the right to continue enriching uranium, full sanctions relief, and the complete withdrawal of all U.S. combat forces from the Middle East. The U.S. called those demands nonstarters. Iran called the American proposal unacceptable. In addition, there was a strike on the East/West pipeline in Saudi Arabia after the ceasefire sending some jitters that the ceasefire will not be followed.  At this moment, we are unsure of who struck the pipeline, but 600k barrels per day went offline.  Physical crude markets began climbing again, and paper prices quickly bounced back toward where they were before the ceasefire was announced, telling you clearly that the market does not believe this pause will last.

By Friday, the situation had grown more complicated still. Fighting in Lebanon is already straining the truce, with Israeli operations in the south threatening to pull additional parties back into the conflict. The U.S. is now racing to stop Israel from taking actions that could collapse the ceasefire before talks even get started. Iran’s nuclear enrichment program remains one of the hardest issues to resolve, and the U.S. is still reportedly weighing military options to deal with Iran’s nuclear materials if diplomacy fails. Trump has also shifted to a much friendlier posture toward China ahead of a planned visit to Beijing next month, which some analysts read as Washington looking for Chinese help pressuring Iran through back channels.  In return, Xi Xingxing also offered the US a helping hand to intervene with stopping the war in Iran.  Both China and the US seem to be understanding that they will need to work together to stop the conflict.  And both countries’ economies are dependent on the Straight being reopened.

On the economic front, the March inflation report printed at 3.3%, up sharply from 2.4% in February, with the increase largely driven by a 10.9% surge in energy prices. The big energy price spikes really began taking hold in April, so the damage is not yet fully visible in the data. I am calling for a 4% or higher print in April, and if this war continues, inflation will keep climbing toward 5-6% as the global shortage of energy drives up the cost of nearly everything we buy. A potential for stagflation or a mild recession continues to remain on the table.

The Chicago spot market diesel prices moved higher again this week as refinery maintenance put additional pressure on local supplies. Marathon and Phillips 66 are running a bit behind schedule, which is pulling surplus diesel barrels out of the market at exactly the wrong time. Farming season is approaching fast, and demand for diesel will skyrocket in the coming weeks. If diesel is not flowing at full capacity our of Chicago refineries when that demand hits, the Chicago spot diesel market could get pinched hard.  Gasoline prices finished the week lower, however with the wild volatility retail prices will be all over the map.  There is also a meaningful incentive right now to move gasoline and diesel barrels south for export given the global price arbitrage, which further tightens local supply. If crude oil prices hold at current levels, we could see some modest diesel relief in May, but for now retail gasoline prices will remain near current levels and diesel retail prices will hover near $5 per gallon. I do not see meaningful relief at the pump in the near future.

Propane had an interesting week. Production hit a record level above 3M barrels per day, and exports hit a record 2.4M barrels per day, yet the EIA reported only a 600k barrel increase in inventories which is a much smaller build than recent weeks. Propane inventories remain 71% above the five-year average for this time of year, one of the strongest inventory positions in history. Many in the market are beginning to believe that rising export capacity will start to eat away at the large surplus over the coming months. Propane future prices fell with crude on Wednesday when the ceasefire was announced but firmed back up quickly. I can see retail prices coming down a little heading into summer for the summer-fill season. Propane continues to be by far the least inflationary energy product, and I expect next season’s higher contracts to be only a little higher in prices compared to last year.

As always, if you have any questions please feel free to give us a call. Have a great weekend!

Best regards,

Jon Crawford

Sources: Bloomberg, Reuters, Wall Street Journal

Highest Priced Fuel Going Into Spring

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Happy Friday!

Energy markets experienced another historic week as the war in Iran continued to escalate with no clear path toward resolution. Crude oil prices surged throughout the week, with WTI pushing well above $100/barrel and Brent trading above $140/barrel on the physical spot market by Thursday — even though paper Brent held around $110/barrel. Brent is now on track for a record monthly gain, having surged roughly 59% since the conflict began. The International Energy Agency continues to describe the current situation as the worst global energy supply shock in history.

The most significant shift this week came on Tuesday, when Trump signaled he was willing to end the U.S. military campaign against Iran even if the Strait of Hormuz remains largely closed. Rather than taking on the job of clearing the waterway ourselves, the administration indicated it would continue to focus on destroying Iran’s navy and missile stockpiles, wind down the fighting, and then use diplomacy to push Tehran to reopen the Straight. Trump also called on other nations to launch their own operations to clear the Strait. The market briefly interpreted this as bearish — until Thursday, when Trump went in the opposite direction. In a speech that was difficult to digest, Trump signaled that more strikes on Iran were going to continue for two to three more weeks and offered no plan for reopening the Strait. Crude prices ripped more than 10% higher on Thursday alone following the speech.

The conflict continued to intensify throughout the week. Iran struck an oil tanker off the coast of Dubai on Tuesday, a reminder that Iran’s ability to threaten Gulf shipping has not been eliminated. On the diplomatic side, representatives from Egypt, Saudi Arabia, Pakistan, and Turkey met early in the week to discuss possible paths toward talks, with Pakistan preparing to host any future negotiations. However, the Ayatollah continues to reject any ceasefire proposals, and Iran is now said to have its targets set on American businesses as well as additional U.S. bases in the region.

Perhaps the most remarkable development of the week was Iran’s decision to convert the Strait of Hormuz from a blockade into a revenue stream. Iran’s Revolutionary Guard Corps is proposing a toll system, creating a ranking of countries from one to five with friendlier nations receiving better terms. For oil tankers, the starting price in negotiations is roughly one dollar per barrel, payable in Chinese yuan or stablecoins. Once a toll is paid, ships receive a permit code and route instructions, are expected to fly the flag of the country that negotiated passage, and are escorted through a route close to the Iranian coast by a patrol boat. Iran is not looking to simply blocking the Strait.  They want to use it to build new political and financial relationships while the war continues.

The supply picture remains extremely difficult. About five percent of the world’s crude-carrying tankers remain trapped inside the Persian Gulf, and the global fleet is badly out of position to handle rerouting. Diesel-hauling tankers that had been heading toward Europe have turned away, rerouting around Africa and taking the longest routes possible. The UAE is preparing to help reopen the Strait by force as a Gulf-led coalition begins to take shape, but the timeline and risks remain unclear. The April 7 deadline Trump set for Iran to reopen the Strait is now days away, and with Iran actively building a toll system rather than opening the Straight, the market has very little confidence in any near-term outcome.

On the economic front, gasoline prices in the United States continues to remain above $4/gallon. History suggests those prices will not come back down quickly.  In 2022, it took five months for pump prices to fall back to normal after spiking with the war in Ukraine. Diesel prices surged another 50 cents or more on Thursday alone following Trump’s speech. With the backlog of ships, the amount of refining capacity shuttered across the Gulf, and the time required to restore damaged infrastructure, I do not see a realistic scenario where prices drop dramatically for at least six to nine months. If the Strait is not reopened by the end of April, paper crude prices will likely jump to meet physical spot prices and push everything higher from there. Because crude oil affects the price of nearly everything we consume, I believe there is a possibility of a 6% inflation print this summer, putting potential stagflation or a mild recession on the table.

The Chicago spot market had an explosive week with diesel prices rising close to a dollar per gallon and gasoline up more than 30 cents. The move was driven by higher crude prices combined with accelerating seasonal demand as farming season approaches. I do not see any scenario in the near term where gasoline or diesel prices come down. Gasoline will exceed $4 per gallon at the pump, and diesel is headed above $5 per gallon. Diesel prices have now inflated approximately 85% since the first week of January.

Propane continues to decouple from the volatility gripping crude oil and diesel. U.S. propane inventories are on track to hit record highs, as is inventory in the Midwest. There is no realistic scenario where propane production decreases — propane is a byproduct of crude oil drilling, and there is no chance drilling slows at current prices. Even with record export activity, inventories will continue to build. I believe summer fill prices might come down a bit and next year’s contracts will be under $2/gallon, making propane by far the least inflationary energy product during the war. Where diesel has seen the 85% inflation since January, propane is looking at closer to 10%.

As always, if you have any questions, please feel free to give us a call. Have a great Easter weekend!

Best regards,

Jon Crawford

Sources: Bloomberg, Reuters, Wall Street Journal