Monthly Archives: July 2026

Back Above $90

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Happy Friday!

Oil briefly crossed $90 a barrel on Thursday for the first time since the spring and then pulled back to close the week near $89. WTI is up nearly 40% in July alone, and this was a week that showed exactly why prices are not coming back down anytime soon. Three major supply routes went under attack simultaneously. The Strait of Hormuz running almost no ships. The Houthis made good on their naval blockade of Saudi Arabia. And Kazakhstan lost half its oil production in a single day to Ukrainian drone strikes. Here is what drove the market this week.

Monday arrived with some diplomatic hope after an entire week of escalation. The U.S. had now carried out nine consecutive nights of strikes on Iran, and the weekend brought sad news for America.  Three American military personnel were confirmed killed in Jordan. Iranian forces struck back at U.S. assets across the Gulf and also hit desalination facilities in Kuwait and Bahrain. The Houthis declared a formal naval blockade of Saudi Arabia on Monday morning, calling it an “eye for an eye” response to Saudi airstrikes on Yemeni territory. Two oil tankers were reported immobilized by the IRGC trying to cross the strait. Iran’s foreign ministry sent the week’s most unexpected message saying negotiations could be pursued based on national interests.  But the market heard it as a possible opening after many days that looked increasingly like a runaway escalation.  Oil prices pulled back on the news.  The pattern of this war has been: talk surfaces, oil drops, talks go nowhere, oil climbs back. We have been through that cycle enough times that caution is warranted. The domestic fuel picture on Monday already told you how little cushion exists if talks fail again. Gasoline crossed back above $4 a gallon. Diesel is running north of $5 for farmers and truck drivers.

Tuesday brought another day of steady fighting and a deteriorating supply picture. A commercial tanker was struck in the Strait while trying to cross and crew members had to abandon ship. U.S. forces bombed targets in southern Iran, Iran struck back at U.S. bases in Bahrain, Kuwait, and Jordan, and the covert ship-to-ship transfer network that had been the Gulf’s main workaround slowed significantly after the latest wave of Iranian attacks. The Houthi naval blockade of Saudi Arabia became a real concern Tuesday, with the focus sharpening on Saudi Arabia’s Red Sea pipeline route to Yanbu.  This was the very bypass the kingdom built specifically because Hormuz is no longer reliable. If that route gets disrupted too, Saudi Arabia loses both of its export pathways at once.  On the macro side, oil could rally to over $120 a barrel in the fourth quarter if the Strait of Hormuz remains disrupted. That is not base case, but it is a possibility based on the pace of the past two weeks.

Wednesday pushed WTI above $87 and the week’s most consequential new development arrived in the Red Sea. Three Saudi crude tankers were loaded with oil bound for China and India when they reversed course and turned back rather than sail past Yemen. The Houthi naval blockade was no longer just a threat. It was real enough to make fully loaded supertankers change course. Asian refiners who had been counting on Saudi crude for August delivery are now scrambling. Meanwhile, the EIA inventory report had a somewhat surprising result.  All U.S. petroleum stocks built for the week. Commercial crude rose 2 million barrels. Gasoline gained 0.8 million. Distillates added 1.4 million. Propane surged 6.3 million barrels to a level now 34% above the five-year average. These builds reflect two things.  One, domestic refineries are running at near-maximum capacity pulling in imports from wherever they can get them.  And second, U.S. production is continuing to creep higher. But the underlying tightness has not disappeared.  Distillate stocks are still 10% below average and gasoline is 7% below normal.

Thursday was the day this week became historic. Oil surged for a fifth straight session, pushing over $90, on news that the Houthis had followed through and struck a Saudi crude tanker near the Bab el-Mandeb strait in the Red Sea. Saudi confirmed at least one ship was hit. Nearly 9 million barrels a day of oil flowed through that strait over the past month. Estimates are that roughly 4 million barrels of that would be extremely difficult to reroute if both Hormuz and Bab el-Mandeb are effectively closed simultaneously. The Strait of Hormuz was running at just three  crossings per day on Thursday, down from 18 per day one week earlier. And then Kazakhstan arrived as an entirely new storyline. Ukrainian drone attacks on the Caspian Pipeline Consortium’s Black Sea export terminal forced Kazakhstan to cut production to just over 400,000 barrels a day, less than half of its normal 925,000 barrel daily average. The CPC pipeline handles almost 2% of global oil supply and is the main artery for reaching European refiners.  On the other side of the world, international buyers flooded back to U.S. crude purchases as Gulf supply dried up again.

Friday brought the pullback of the week. Oil fell more than 3% after briefly touching past $90, partly on profit-taking after the dramatic Thursday move.  Also, Trump’s announcement of new tariffs on 60 trading partners added a layer of possible economic slowdown on top of everything else. When traders think the global economy is about to slow down they sell oil even in a supply crisis. But the weekly gains are very real, and the supply picture that drove prices to $90 has not changed. The Red Sea picture today is more nuanced than a clean blockade. Chinese and Russian-linked tankers have been passing through the Bab el-Mandeb without incident.  The Houthis appear to be letting allied nation ships through unharmed.  Some Saudi crude is still moving. But the economics of using the alternative routes is much more expensive.  India’s refiners are already racing to find alternative supply.  OPEC is set to meet August 2 and is expected to raise its output target, but these quota increases are essentially meaningless right now. OPEC is signaling market recovery but its members physically cannot deliver what they are promising.

The Chicago spot market moved higher with crude oil this week. Diesel jumped over 30 cents a gallon and gasoline followed crude upward while staying more contained thanks to healthy inventories during peak summer demand. I expect retail prices to move higher at the pump, with diesel rising at a steeper rate than gasoline. One thing I am watching closely is that Chicago diesel is still trading at roughly a 50 cent per gallon discount to the NYMEX heating oil contract.  This is an unusually wide gap. With refiners booking extraordinary margins on diesel right now, if Chicago gets at all tight on supply that basis could close fast. Monday is important to watch.  The August prompt contract expires and a rebalancing of that basis could take place around the rollover. Early next week will tell us a lot about the trajectory of diesel prices heading into August.

Propane continued to trade in a very narrow range, and Wednesday’s inventory report showed a massive build.  Many in the market attributed the build to a rebalancing of volumes that had been moving around over the past month, rather than a genuine demand event. Propane summer fundamentals remain in play through end of September, which means you still have time to capture some attractive summer fill pricing before the heating season dynamics start pulling prices higher. That said, in an environment this volatile, I strongly recommend ordering your summer fill sooner rather than later. Next heating season contracts are available.  Please give us a call and we will walk you through your options.

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

No Break In The War

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Happy Friday!

Oil is ending the week around $85 a barrel, up more than 20% from where it started Monday.  This was one of the most alarming weeks of the entire Iran conflict. The brief peace deal that looked promising three weeks ago has completely unraveled. Six straight nights of U.S. airstrikes, Iranian missile attacks on American bases across the Gulf, cruise missile strikes on UAE tankers, Iran’s first direct attack on U.S. facilities in Syria, and now a credible threat to close both the Strait of Hormuz and the Red Sea simultaneously. The market spent all week trying to catch up to events that nobody expected to happen this fast.

Monday started badly. Over the weekend, Iran had targeted U.S. military facilities across the Gulf and declared the Strait of Hormuz closed again. Monday morning brought fresh news that Iran’s Revolutionary Guard had attacked U.S. bases in Kuwait and Bahrain. Ship-tracking data showed only six vessels transited the strait on Sunday.  That was the lowest single-day count in five weeks. Oil surged more than 3% on the open. The Iranian oil that briefly flooded the market during the ceasefire window is now sitting idle at sea, floating in limbo. Iran’s oil is stuck not because of sanctions alone but because the buyers it was counting on found better deals elsewhere. Another interesting report was that the DOE officials announced that the Strategic Petroleum Reserve’s aging infrastructure is being held together with Band-Aids. The 60 Gulf Coast salt caverns were built in 1975, and investment in maintaining them has not kept pace with the demands being placed on them.  At current levels, pumping oil out of the caverns is becoming difficult and there are potential dangers of refilling them at these lower levels.

Tuesday was the heaviest single day of military exchange since the war began. Iran struck two UAE tankers with cruise missiles in the Strait. The UAE has been running record production of over 4 million barrels a day in large part because of this improvised system moving shadow tankers. One Indian crew member was killed and eight others wounded. Iran also fired ballistic missiles at a U.S. air base in Jordan, and the U.S. struck back with five hours of attacks on Iranian targets. Yemen’s Houthi movement fired missiles at Saudi Arabia, adding another thread. Trump reinstated the full U.S. naval blockade of Iranian shipping. Asian refiners responded by actively looking to replace Middle Eastern crude with American oil. Japan, South Korea, and India are all in the market for U.S. barrels. The June Consumer Price Index came in at 3.5% year-over-year, better than the 3.8% economists expected and down sharply from 4.2% in May. But I would not read too much into that. Most of that improvement reflects the drop in gasoline prices during the brief ceasefire window in June.

Wednesday pushed WTI above $80 a barrel for the first time in weeks. The U.S. launched another wave of strikes. Iran struck back at U.S. bases in Bahrain, Kuwait, and Jordan.  Iran then threatened directing its Houthi allies in Yemen to close the Bab el-Mandeb narrow gateway at the southern end of the Red Sea. The Strait of Hormuz carries roughly a fifth of the world’s oil. The Bab el-Mandeb is how that oil gets to Europe and the Atlantic. Threatening both points simultaneously is not something the market has ever had to price in before. The EIA weekly report showed crude stocks fell 1.7 million barrels to 409 million barrels, which is still 6% below the five-year average. Gasoline dropped another 1.5 million barrels and is 8% below average. Diesel stocks rose 4.6 million barrels, which is good news. An interesting data point out of China noted that crude oil imports fell 41% in June compared to a year ago.  And China drew down its strategic reserves at a pace 85% faster than in May just to keep refineries running. When that restocking demand eventually arrives, it will add significant pressure to an already stressed global market.

Thursday brought oil to its highest level in about a month, holding near $83 after surging roughly 12% over the prior three sessions. The fifth consecutive night of U.S. airstrikes on Iran kept pressure on prices. Only seven ships crossed the Strait of Hormuz on Wednesday, down from thirteen the prior day. Iran declared Hormuz an inviolable “red line” and warned that if Trump carries out his threat to bomb Iranian power plants and bridges, it will retaliate against all energy infrastructure across the Gulf.  Houthi forces in Yemen have already completed preparations to close the Bab el-Mandeb, deploying missiles and drones in Yemen. Saudi Arabia has been rerouting roughly 7% of global energy supplies through its East-West pipeline to the Red Sea port since the Hormuz closure began. If that bypass gets cut simultaneously, the supply shock would be historic. A drone also struck a tanker at Iraq’s Basra export terminal on Thursday, briefly forcing a suspension of all crude loadings.  The U.S. reportedly struck a supertanker near Iran’s main export terminal in the Persian Gulf. Both sides are now targeting energy infrastructure directly, not just military assets. I do not expect prices to stay calm if Iran follows through on either the power plant threat or the Red Sea order. I am watching both very closely.

Friday confirmed the direction of the week. Oil rose more than 2% as the U.S. and Iran traded strikes for a sixth straight night. Only three commercial vessels crossed the Strait on Thursday.  This was the fewest single-day crossings since May.  And for the second straight day not a single large crude carrier or fuel tanker made it through. Some crews are simply refusing to make the trip regardless of pay. Iran expanded the conflict overnight to Syria.  This was the first direct attack on U.S. facilities there.  And they struck a Kuwaiti power generation and water desalination station. That signals Iran is willing to threaten the stability of its neighbors beyond shipping. On the domestic supply side, U.S. refiner margins hit a fresh record high for the third straight session. Demand for American refined products from overseas buyers has pushed U.S. fuel exports to record levels. That is welcome for producers, but it means domestic fuel stockpiles are being drawn down to supply the world, which pushes gasoline and diesel prices higher for everyone here at home. Midwest farmers are feeling this right now during the height of summer operations.

The Chicago spot market moved sharply higher with crude prices this week. Gasoline jumped over 20 cents a gallon and diesel over 40 cents. I expect prices at the pump to move meaningfully higher heading into next week. One thing I am watching closely is that Chicago diesel is currently trading about 60 cents a gallon cheaper than NYMEX heating oil, which is an unusually wide gap. With refiners running highest possible capacity on diesel, if Chicago gets tight on supply at all, that basis could explode another 30 to 40 cents in a hurry. The Group spot market is also showing weak diesel basis right now, which tells me supplies are currently healthy.  But it would not take much of a disruption to change the situation quickly. Gasoline basis is a little soft but nothing that has me worried at this point.

Propane prices appear to have found a floor and have been stable this week. Given everything going on, I only see potential upside for propane heading into the winter heating season. I do not think the upside is as dramatic as it has been in some past years, but that can change quickly during periods of high demand when logistics get strained. Even with fundamentals looking somewhat comfortable right now, I still recommend locking in some heating gallons for next season while you can. And if you are able to top off your tank this summer, it will lower your cost average for the 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

No One Knows

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This was a week that started with oil looking like it was finally settling down and ended with analysts questioning whether the Strait of Hormuz will ever be reliably open again. A lot happened this week!

Monday opened quietly. WTI slipped to around $68/barrel, down about half a percent, after OPEC and its allies agreed over the weekend to pump another 188,000 barrels a day starting in August. On the surface that sounded like a lot of new supply hitting an already recovering market, but the reality was more nuanced. Those barrels were not new production.  They were countries slowly climbing back toward levels they had pledged before the war. Gulf exports had already jumped more than 3 million barrels a day in June compared to May, topping 10 million barrels a day for the first time since the conflict began. The last tankers trapped inside the Strait during the war were finally starting to make it out. Chinese refiners were buying discounted Middle Eastern crude as fast as it arrived. Monday felt like crude oil was finally finding balance.

Tuesday was the first warning of the situation changing. Iran’s Revolutionary Guard fired missiles at ships in the Strait of Hormuz, striking a Saudi crude oil tanker and another vessel. Iran’s foreign minister said peace talks were off the table as long as Trump kept threatening strikes. The fragile ceasefire looked like it was on its last leg.  In addition, Saudi Arabia announced it was studying an expansion of its East-West crude pipeline to the Red Sea.  The project would let it move up to 7 million barrels a day to export markets without ever crossing the Strait. Clearly Gulf countries are starting to plan for permanent Strait issues.

Wednesday was the pivotal day. The chain of events moved fast.  Iran struck commercial vessels, the U.S. launched airstrikes on Iran’, Iran retaliated against U.S. military sites in Bahrain and Kuwait, and then Trump declared at the NATO summit that the interim peace deal was over.  WTI jumped more than 5% to $74.44 in a single session. Tankers turned back from the Strait rather than risk the crossing. Washington reinstated full sanctions on Iranian oil starting July 17.  The EIA’s weekly data that afternoon added more color to the picture. Crude inventories actually built by 3 million barrels.  This was the first build since mid-April.  But distillate stocks dropped 5 million barrels, landing 12% below their five-year average.

On Thursday traders seemed to take a breath and reassess the situation. Shipping through Hormuz had nearly stopped. Only about 20 commodity carriers crossed in either direction on Wednesday, the lowest daily count since before the June deal.  And Thursday even that number had decreased. Country representatives were urging shipping companies to pause movement. The concern is not just this week’s fighting. As long as the U.S. and Iran are fighting for control of the Strait, every ceasefire is just a pause between confrontations.

The diesel story also came into sharper focus Thursday. Russia announced a ban on diesel exports through July 31st as a direct result of Ukraine’s drone campaign against Russian refineries. Moscow’s domestic fuel situation had deteriorated enough that it needed to keep supply at home. Combined with Gulf refineries still running at less than half of prewar capacity, the global diesel market was left without its two biggest emergency supplies at the same moment. The crack spread, the gap between what crude costs and what a barrel of gasoline or diesel sells for, had climbed to roughly $57 a barrel, near its highest level since 2022. Crude prices still have come down a lot from their war peaks. But diesel prices were not following due to tight world supplies.

Friday brought a slight pullback, but oil was still on track to finish the week well above where it started Monday. Trump said he did not think the war would restart. The U.S. and Iran were reportedly still talking through back channels despite the fighting. The IEA confirmed what the market had been feeling all week.  Crude is becoming well supplied, but refined products remain exceptionally tight. Gulf refineries are still offline, and product exports from the region are running below half of prewar levels. That gap will not close until those facilities restart.  And that takes months, not days, regardless of what happens with Iran. On a more positive note, governments around the world are lining up to rebuild the emergency reserves they drew down during the war. Analysts estimate that strategic petroleum reserve purchases could add up to roughly 664,000 barrels a day of demand through the middle of 2027.  This demand increase will help absorb some of the supply OPEC is putting back into the market and give prices a floor. I do not expect oil to collapse, even if the Iran conflict ends.

The Chicago market tracked crude oil closely through the week’s volatility. Prices climbed sharply on Wednesday alongside WTI, then retreated somewhat on Thursday and Friday. Even with those pullbacks, I expect to see retail prices on gasoline and especially diesel move higher in the days ahead. Crack spreads here in the U.S. are at their highest level since 2022, which means refiners are being rewarded handsomely for every gallon of gasoline and diesel they produce. The export arbitrage right now is extraordinary, and if domestic refineries are running at the limit to serve overseas markets, that will eventually show up as tighter supply closer to home. I am watching the Gulf situation closely this weekend.

Propane prices stabilized this week after falling the week before. Summer fills are in full swing, and we are currently at the lowest price of the year so far. I continue to strongly recommend topping off your tank this month or in August and locking in some heating gallons for next winter now. The geopolitical situation can shift quickly, and when it does, prices move fast. Right now you have an excellent opportunity to secure supply at favorable levels before the fall heating season.

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

Happy 4th Of July!

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Happy Friday and 4th of July weekend!

Oil finished the week around $69 a barrel and this was a week where the price kept drifting lower even as the news got more complicated. The Strait is still open and tankers are still moving, but the talks between the US and Iran are going nowhere fast, and both sides are starting to look pretty far apart on the most important questions. Here is what drove the market this week.

Monday started with oil bouncing back to about $70 a barrel after a rough weekend. Over the prior few days, Iran struck an oil tanker inside the Strait, the US fired back with fresh airstrikes, and several big ships that were planning to cross turned around and went home. But Monday brought an agreement from both sides to stop the reciprocal strikes and get back to the table.  And that was enough to push prices back up about 1%. The ceasefire is still fragile, but it held. Saudi Aramco kept loading oil after the strikes, so some optimism remained in the market. A fourth supertanker was spotted loading there on Monday, adding to the three that moved the week before.  Venezuela had a rough weekend too.  A power outage from the earthquakes knocked out its biggest refinery. The good news is it came back online, and the country confirmed its oil production and exports were not affected.

Tuesday brought a diplomatic disappointment. US envoys flew to Qatar to restart talks with Iran. Iran didn’t show up. A Qatari official confirmed no high-level meeting happened, and mediators were basically just trying to keep things from getting worse. This matters because the 60-day window for turning the signed agreement into a permanent deal is ticking.  Oil barely moved on Tuesday, holding near $71, which tells you the market had largely expected this. The bigger picture on Tuesday was that banks were cutting their oil price outlooks for the rest of the year for the first time since the war started.  Gulf oil is coming back to market faster than the peace negotiations are moving forward, and analysts now expect there to be more oil than the world needs next year. Iraq started offering massive discounts to any buyer willing to send a tanker through the Strait.  When a country is pretty much selling oil at cost, that tells you the supply picture has shifted from a few months ago.

Wednesday was quiet on the diplomatic front but busy on the data side. The government’s weekly oil report showed US crude stocks fell another 3.8 million barrels, leaving inventories about 7% below where they normally are this time of year. Gasoline also dropped 2.3 million barrels and is 7% below seasonal average. On the flip side, diesel stocks rose 2.5 million barrels, which continues to be a surprise. Refineries were running at 96.6% of capacity which is essentially full speed. There was an interesting data point discussed in the report.  Americans are actually using less gasoline and diesel than they did a year ago. High prices from this spring left seem to have finally hit pocket books and people are cutting back. US crude oil production hit a record high in April of almost 14 million barrels a day.  The extra supply is going to add to the global surplus that analysts are worried about in 2027. Russia’s fuel problems got even worse on Wednesday.  Russia is now buying gasoline from India by ship. Ukraine has shut down so many Russian refineries with drone strikes that Russia is no longer able to produce enough finished product to meet the country’s demand.

On Thursday, oil prices fell again, dropping close to 2%, as the US-Iran talks in Doha wrapped up with what the US called “positive progress” but news outlets in Doha countered with publishing no actual breakthroughs. The 60-day clock keeps running with no deal on the horizon. Iran has somewhere between 58-68 million barrels sitting on tankers with no clear buyers. More than 90% of those ships show no destination. Iran has until mid-August under the US sanctions waiver to find buyers for that oil. Ukraine struck another Russian oil refinery Thursday adding to the continued growing list of Russian refineries driven offline.

Chicago spot prices did not move that much this week, and the market moved pretty much in line with crude oil. Diesel made some big up-and-down swings during the week but ended up right about where it started. Gasoline was flat all week. I expect to see prices at the pump stay about the same heading through the holiday weekend.

The big news on propane is that prices dropped heading into July. Demand has been weak, production has been strong, and even though exports are running at record levels, inventories remain at high levels. Combined with lower crude prices, propane prices moved down to its lowest price of the year. This is the best time we have seen all summer to fill your tank. I still strongly recommend topping off now and locking in some gallons for next heating season while prices are this low.

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

Best regards,
Jon Crawford

Sources: Bloomberg, Reuters, Wall Street Journal