Monthly Archives: June 2026

Lots To Discuss Even Though Markets Were Closed Friday

Posted on by

Happy Friday!

Oil is ending the week right around $77 a barrel.  This was the week the world actually saw a peace deal get signed, watched the first supertankers move through the Strait of Hormuz in months, and celebrated gasoline dropping below $4 a gallon for the first time since March. And then Friday morning brought a fresh complication that reminded everyone how fragile this whole thing still is.

The week started Monday with oil already down sharply after Trump announced over the weekend that the U.S. and Iran had agreed to an interim peace deal. Pakistan’s prime minister confirmed that both sides would sign a formal memorandum of understanding in Switzerland on Friday. The terms were significant: the Strait of Hormuz would reopen toll-free, the U.S. naval blockade of Iranian ports would end, and Iran would get the right to resume oil exports immediately. The E4 nations said they were prepared to lift sanctions on Iran in exchange for steps toward nuclear disarmament. Iran agreed in principle to not produce or acquire nuclear weapons and to dramatically reduce its enriched uranium stockpile.

The market priced all of this in with cautious optimism rather than outright celebration, and I think that was the right call. Oil traders have watched Trump announce imminent deals on the Strait many times since February only to see fighting resume. The full text of the agreement still had not been released Monday, and major shippers said they would not restart Hormuz transit until the waterway was confirmed safe, including mine clearance.

What most people did not know until Tuesday was that the U.S. military had been quietly running a covert ship-to-ship oil transfer operation since early May to keep Gulf energy moving during the war. At least 92 ships were involved with handoff points near Fujairah in the UAE and Oman’s port of Sohar. Here is what I find remarkable about that.  This is the exact same technique Iran has used for years to evade U.S. sanctions. Washington borrowed Iran’s own playbook to keep oil flowing during the war with Iran. Oil fell further on Tuesday, extending the two-day slide.

Wednesday brought more detail on the deal itself. Further details explained that Iran would be allowed to resume oil sales immediately upon signing, and the agreement included access to a $300 billion fund to help rebuild Iran’s economy.  The IEA also weighed in Wednesday with its first look ahead at 2027.  They believe global oil supply is on track to surge roughly 8 million barrels a day next year while demand grows by only 2 million. On the domestic supply side, the weekly inventory report showed crude stocks fell another 8.3 million barrels, leaving U.S. inventories about 6% below the five-year average. Gasoline is also 6% below normal and distillates are 13% below.  These inventory deficits are occurring all while refineries are running at 96.7% utilization.

Thursday was the big day of the week. Trump and Iran’s President both signed the memorandum of understanding.  Within hours of signing, three Saudi-flagged supertankers carrying a combined 6 million barrels of crude crossed the Strait. Ship-tracking data showed at least 12 million barrels of crude in motion out of the Persian Gulf by midday. Shippers are still moving carefully.  In addition, Ukraine also struck another Moscow main oil refinery on Thursday in a major drone attack, the second strike on the facility that week.  The strikes were a reminder that Russian energy infrastructure remains under continued pressure.

And then Friday arrived. Switzerland announced that the formal U.S.-Iran peace talks scheduled for today in Geneva will not take place.  The postponement does not cancel the signed agreement.  On top of that, Iran’s Revolutionary Guard Corps has quietly set up new covert cells in Iraq with the aim of carrying out attacks on Gulf countries that host American forces.  That kind of activity is exactly the type of thing that could unravel this deal if it escalates.

The dollar had its biggest two-day rally in three months.  The Fed held rates steady Wednesday under new chairman Kevin Warsh, as expected. But Warsh made clear the Fed will not tolerate a resurgence of inflation, and half of the rate-setting committee is now projecting a rate hike by year-end. Two-year Treasury yields jumped 13 basis points in a single day.  This was the biggest single-day move in more than a year.  These economic decisions affect the strength of the dollar which puts pressure on oil prices.  Regardless, national average for gasoline at the pump dipped below $4 a gallon for the first time since March.

One of the more lasting takeaways from this week is how permanently the Hormuz closure has changed the way the oil world thinks about risk. Japan sourced roughly 90% of its crude from the Persian Gulf before the war. It now maintains a steady base of U.S. oil purchases every month and is not going back. Saudi Arabia and the UAE are accelerating pipeline expansion plans to bypass the strait entirely. That infrastructure buildout will reshape the region’s energy geography for decades.  And it means the next disruption of the Strait will hit a market that has already started rewiring itself, therefore, taking some leverage out of the hands of Iran.

Chicago had a quiet week, and after the past two weeks of volatility, I will take it. The spot market traded in lock-step with crude oil, inventories are healthy, and basis movements were stable. Diesel prices at the pump should continue to drift lower as inventories replenish with cheaper cost product. Gasoline was mostly stable and I do not expect much change there heading into next week.

Propane continues to trade in a very narrow range and I do not expect to see any meaningful price drop unless crude oil prices collapse further.  And given everything that is still unresolved, I would not count on that. The situation looks a bit rosy right now, but we are definitely not out of the woods yet. I still strongly recommend topping off your tank this summer and locking in some heating gallons for next winter before any surprises push prices higher. We have prepay, budget, and price-lock options available.  Give us a call and we will get your summer fill scheduled and walk you through your contract choices.

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

Let’s Make A Deal!

Posted on by

Happy Friday!

Oil ended the week at its lowest price in nearly two months, settling around $84/barrel, after Trump called off threatened new military strikes on Iran and a Western a ceasefire deal could be signed as soon as Sunday. That is the biggest piece of good news the oil market has seen since this war began. Here is what is driving the market.

This was a week where the fighting and the diplomacy happened at the same time, which made it impossible to know which way things were heading on any given day. It started with a surprise on Monday when Israel struck Hezbollah positions and an Iranian petrochemical complex over the weekend, and Iran fired missiles back at Israel.  This was the first direct exchange between the two countries since the April ceasefire. The fragile two-month truce seemed to be collapsing. WTI shot up more than 4% at the open. Then Tuesday brought some relief after Trump called on both sides to stop shooting and Iran and Israel stopped attacks.  But both made clear they’d resume if the other acted first, so it was more of a pause than a truce. Wednesday brought another escalation. A US Apache helicopter was shot down near the Strait, Trump ordered retaliatory strikes, Iran hit US bases in Jordan and the Gulf, and Trump began threatening to strike Iranian power plants and bridges. By Thursday the strikes were near-daily, Iran formally declared the Strait of Hormuz closed, and Trump posted on social media that the US would take control of Kharg Island.  Remember, Rharg Island is the terminal handling roughly 90% of Iran’s oil exports. Oil briefly spiked to $95/barrel on that news. And then Friday morning, the tone flipped completely. Trump reversed course, said a deal would be done in days, Iran confirmed active negotiations, and the US military posted that commercial ships continued to move through the Strait. Prices dropped sharply. Nothing is done until it’s signed, but this is the clearest path to a deal we have seen in months.

Beneath all the daily drama, the underlying supply story got a little worse this week. US crude inventories fell another 7.2M barrels, now about 5% below where we would normally be at this time of year. That marks nine straight weeks of declines. Gasoline is 6% below its five-year seasonal average, and diesel is 13% below. Refineries are running at 95% of capacity just trying to keep up. Kuwait did make the first offer to sell refined products from the Gulf since the war began by structuring cargoes to bypass the Strait entirely.  Kuwait is going to use ship-to-ship transfers off India’s west coast and storage terminals in Oman. It is a small amount compared to normal traffic, but it signals that Gulf producers are finding creative ways to move oil even in the middle of active conflict. On the global supply front, Russia is cutting crude exports from its western ports from 2.5M barrels per day in May down to 1.7M in June, adding another layer of pressure to an already tight market.

Stateside, the US quietly became the world’s largest oil exporter for the third month in a row, with American crude and fuel exports running about 10.5M barrels per day in May.  There is one longer-term concern worth keeping an eye on.  When the Strait eventually reopens, every Gulf country will be desperate to pump as much as possible to make up for months of lost revenue. That flood of returning supply all hitting the market at once could push prices sharply lower, and OPEC will have limited ability to coordinate a response. The UAE has already left the cartel and others may follow after the Strait reopens.

Summer is here and American drivers are heading into peak travel season with pump prices still running about 40% higher than before the war started.  Gasoline retail is still overing above $4/gallon. Refineries have been running hard but have been prioritizing diesel and jet fuel production to cover global shortfalls and book incredible margin.  The move to distillates has left gasoline inventories lean. Also worth noting, the government held a federal lease sale in Alaska’s Arctic National Wildlife Refuge this week. Not a single major oil company bid on the lease. The political risk of investing billions in a project that a future administration could shut down was too great. Trump’s administration is feeling pressure on multiple fronts including inflation topping 4% in May.  Inflation has now surpassed increased earnings due to energy starting to drive up the cost of goods.

The weekend could be one of the most important in months for fuel prices. If a peace deal is signed and the process of reopening the Strait begins, prices would likely fall further and quickly. The physical market would still take months to fully recover, but a signed deal would give the world a credible timeline for relief.  However, I’m still in the “believe it when I see it” camp.  Even if a deal is signed, the deal hinges on all proxies to Iran not violating the deal.  The past four months have shown us that stability is far from being reached. Stay tuned.

The Chicago spot market was fairly quiet this week.  No major basis moves occurred.  There as a bit of basis in gasoline, but the price collapse on the NYMEX won’t affect retail prices too much.  I expect to see gasoline retail prices hold below $4/gallon in Central Wisconsin.  Diesel prices have stabilized.  I do expect to see diesel retail prices slowly move lower as inventories replenish post May diesel basis-blowout.

Propane continues to hold.  Propane prices did not drop with the hefty drop in crude oil price this week.  Propane inventories did not build as much as expected.  Propane seems to be approaching price discovery.  I’m not sure we will see prices go lower, even with another $5/barrel coming off crude oil prices.  I highly recommend topping off your tank and locking in your price for the 2027 heating season.

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

Best regards,

Jon Crawford

Sources: Bloomberg, Reuters, Wall Street Journal

Lots Of Info, Not A Lot Of Action

Posted on by

Happy Friday!

Oil is ending the week right around $92 a barrel, roughly where it started. It was one of those weeks where everything went back and forth: good news, then bad news, then good news again. Every time it looked like a deal might be coming together, something happened to push it off.

The back-and-forth on peace talks was the story all week. Monday started with the US and Iran exchanging new strikes over the weekend, which erased the optimism from the prior Friday. Tuesday things brightened up when Iran said it was actively reviewing a proposed ceasefire deal and Trump told the public he expected an agreement to reopen the Strait within about a week. Then Wednesday, Iran fired ballistic missiles at Kuwait and Bahrain.  Both Gulf countries that had not been directly targeted in months. The US struck back near the entrance to the Strait, and the whole diplomatic process collapsed again. Thursday, the Trump administration announced a ceasefire between Israel and Lebanon, which is a big deal because Iran has said all along that Lebanon has to stop fighting before it will agree to anything with the US. Oil prices dropped sharply. Then Friday morning, Hezbollah said it never agreed to the ceasefire terms and rejected it, Israel said it wasn’t leaving Lebanon, and we were essentially back to square one. The market held steady rather than crashing, which tells you traders are cautious but not panicking. Nobody is ready to bet big that this gets resolved soon.

The oil supply situation around the world keeps getting tighter. Last week’s government inventory report showed US crude stockpiles fell 8 million barrels in a single week.  Again, one of the biggest one-week drops since this whole crisis started. We are now sitting about 3% below where inventories normally are this time of year. Gasoline is 5% below normal, diesel is 3% below, and refineries are already running near full speed trying to keep up. The total amount of oil stored in the US, including the Strategic Petroleum Reserve, has dropped for ten weeks in a row and is now at its lowest level since 2004. The head of the IEA’s oil markets division warned this week that global inventories could hit critical levels just as summer demand picks up. That is not a minor concern. The IEA is the world’s top energy agency telling us the cushion is nearly gone.  Therefore, we might not be able to keep kicking this can down the road.

Iran’s oil exports have all but collapsed. New data this week showed Iran was only exporting about 200k barrels per day in May.  This is a six-year low, down from 1.3 million in April, and nearly 1.9 million back in March. The US naval blockade is working. There are currently about 145 million barrels of Iranian crude sitting on tankers at sea with nowhere to go, roughly 65 million of those trapped inside the Gulf. Even at these low export volumes, Iran is having to discount its oil just to get Chinese buyers interested, because Chinese refineries are cutting back amid weak demand at home.

Russia is in the same boat in China. Russia’s oil is also getting discounted. Russia also admitted this week for the first time that its overall oil production has dropped this year. The prime minister blamed routine maintenance issues, but Ukraine’s ongoing drone strikes on Russian oil infrastructure, including a terminal in St. Petersburg hit this week while Putin was hosting his annual economic forum in the same city, are widely seen as the real reason.

Looking into the future, Saudi Arabia and the UAE are spending billions to build new pipelines and export routes that bypass the Strait entirely. They learned from this crisis that relying on one waterway is too dangerous. These new routes will stay in place long after this conflict ends. Meanwhile, India raised fuel prices again.  India has raised fuel prices four times since mid-May, and it is already starting to slow down diesel demand in the trucking industry. When Indian truck drivers start cutting back, that matters globally.

Back home, the May jobs report came in much stronger than expected.  The US added 172,000 new jobs, more than double what economists were forecasting, with unemployment holding at 4.3%. Good news for workers, but it complicates things for the oil market. Strong job numbers mean the Federal Reserve has less reason to cut interest rates, which keeps borrowing costs high, which eventually slows economic growth and reduces fuel demand. In addition, higher interest rates inflated oil prices due to oil being traded on the US Dollar.  The 10-year Treasury yield moved higher to 4.47% heading into the weekend with no rate cuts anywhere in sight.

Chicago finally had a calmer week. The spot market continues to balance with the Group Spot market, and both gasoline and diesel prices moved normally alongside crude oil. Both products have now settled at lower average prices than we saw earlier in the crisis. This is a good time to be buying fuel. Gasoline retail prices should hold roughly steady. There was some volatility this week that may take a few days to fully shake out. But diesel pump prices should keep coming down heading into next week.

Propane prices have not come down despite crude oil pulling back, despite an inventory build this week after export volumes dropped. Inventories had been stubbornly flat during what should be the normal build season, so any increase is positive news. However, traders are still bullish propane exports long-term. Right now is a very good time to lock in your heating gallons for next winter before any surprises push prices higher. We have prepay, budget, and price-lock options available. Give us a call and we will get your summer fill scheduled and talk through your contract choices!

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