The ripple effects of the US announcing it would pull out of the Iranian nuclear agreement continue this morning with the entire petroleum complex reaching fresh multi-year highs. $71.89 for WTI, $78.00 for Brent, $2.2339 for ULSD and $2.1834 for RBOB were the high prints overnight before prices pulled back modestly this morning.
Violence between Israel & Iranian forces in Syria stepped up overnight with rocket attacks on both sides of the border. While there is no direct threat to any major supply infrastructure, the indirect threat of violence in the region often seems to be a reason to get oil prices stirred up.
Saudi Arabia didn’t wait long to assure markets that it was ready to step in and “help stabilize” markets that have been roiled by the Iran announcement. In fact any new sanctions may be quite a gift for OPEC members that cut production to try and cut into a global glut of inventories, and now largely thanks to Venezuela falling apart and Iran facing another slowdown, may be able to bring more of their own product to market without crashing prices again.
RBOB gasoline finally joined the rest of the complex overnight by breaking above the highest trade from the Hurricane Harvey spike last fall. For perspective, gasoline prices are trading higher now than they were when more than 20% of the country’s refining capacity was knocked off-line, and many cities saw cars lining up for blocks to get fuel. The high trade overnight came within 25 points of the high print from June 2015, which would make for a nice top for gasoline prices if they can’t muster another rally. On the other hand, if futures do break through $2.19, there’s a technical argument that we could see a run at $2.50.
The DOE’s weekly report was largely lost in the shuffle Wednesday, but had a few notable bullet points to go along with inventory draws across the board.
US oil production estimates hit yet another record last week, rising an impressive 82mb/day. The total estimated daily production has risen more than 1.2 million barrels/day so far in 2018. At this pace, the US will surpass 11 million barrels/day of production sometime this summer, just a handful of months after breaking the 10 million barrel mark for the first time in over 40 years.
Diesel stocks reached their lowest levels in over 3 years last week, in both outright inventory and days of supply terms. Strong domestic demand and heavy exports continue to outpace diesel output that’s been lagging last year’s levels as refinery runs have dipped over the past few weeks.