Global oil prices went through the ‘buy the rumor sell the fact’ on the Iranian attack on Israel and now are still waiting to see what Israel’s response will be. Reports by the Israeli Defense Minister Yoav Gallant said that Israel would have no choice but to retaliate and reports that the ground invasion in Rafah southern Gaza will be put off until the Iranian response happens. This raises more questions than answers. Iran’s attack on Israel seems to have given Israel surges in international support even by Arab nations that are tired of Iran’s goal to disrupt peace in the region.
Iran is the driving force between Hezbollah, Hamas and the Houthi rebels that have basically destabilized the region and caused war and turmoil for almost every country in the world. It also clear that the failure to enforce sanctions on Iran has allowed Iran to raise oil output to a 5-and-a-half-year high and the billions of dollars they are reaping for this has gone to fund terror and bloodshed. Now after the attack, many countries are urging Israeli restraint on its response to Iran but secretly behind the scenes, they would love nothing better than to see the Iranian regime fall because of all the havoc that they’ve been causing. Oil prices have sold off because of the expectation that Israel will be measured in the response and is putting pressure on prices, but it may not be long before we start buying the rumor of an attack once again.
Zero Hedge reports that new statements from the Pentagon issued Monday have said the Houthis fired over 90 ballistic missiles and drones – most of which were intercepted by US and allied forces over the past 48 hours, once the Iranian attack kicked off in the overnight hours of Saturday. US Central Command described that at one point during the attack the Houthis fired an anti-ship ballistic missile directly against US Navy and commercial ships in the Gulf of Aden.
“There were no injuries or damage reported by US, coalition, or commercial ships,” CENTCOM said.
Oil prices seem to be getting mixed emotions from Chinese economic data. The gross domestic product seems to be better than expected but the report on consumer demand seemed to be disappointing especially because of past reports that over the Chinese holiday domestic demand was at pre-COVID levels.
Domestic oil production also increased but make no mistake about it, they’re still going to need a lot of oil from other places. The Wall Street Journal wrote, “With familiar signs of weakness in consumption and real estate in the first three months of the year, many economists say Beijing still isn’t doing enough to support Chinese households and nurture a more balanced recovery. And the loss of some momentum in March compared with the preceding two months reinforced expectations that further stimulus will be needed to ensure that the government meets its growth target of around 5% for the year. China said its economy grew 5.3% in the first quarter compared with the same three months a year earlier, a faster pace than the 5.2% year-over-year growth rate that the country notched in the final quarter of 2023, China’s National Bureau of Statistics said Tuesday. The pickup was propelled by a rise in industrial production and swelling investment in factories. After a challenging few year, Chinese officials are steering activity and investment toward manufacturing and exports to compensate for domestic consumers’ reluctance to spend and a continuing crunch in the property market.”
It is very powerful that yesterday's sell-off oil price low set the low for the week. We expect modest drawdowns in crude oil and products and today’s American Petroleum Institute report and we expect to see an uptick in demand after the drop in demand that we saw over the Easter holiday weekend. I expect that the exports for oil and gasoline will rebound, and we should see an uptick in gasoline demand as well and with the ongoing risk to supplies, it’s unlikely that the market is at a point where it will collapse.
Reuter reports that – Russia has been able to swiftly repair some of key oil refineries hit by Ukrainian drones, reducing capacity idled by the attacks to about 10% from almost 14% at the end of March, Reuters calculations showed. Ukraine stepped up drone attacks on Russian energy infrastructure since the start of the year, hitting some major oil refineries across the world’s second-largest oil exporter in attacks that sent up oil prices.
Natural gas cash prices are falling once again and even with the drop in US natural gas, rigs production may not be falling quite fast enough. Yahoo Finance writes,
“The bearish sentiment surrounding the commodity even prompted shale producers Chesapeake Energy CHK and EQT Corporation to hit the brakes on new drilling. Chesapeake announced a reduction in its drilling rigs so as to lower volume. The company has decided to cut this year’s gas production expectations by around 20%. Chesapeake’s plans rippled through the market, with Appalachian Basin-focused EQT (ST:EQTAB) following on. The explorer and producer of natural gas said that it will lower its daily output by 1 Bcf to combat the supply glut in the U.S. market. According to EQT, the revised plan will likely reduce net production by 30-40 Bcf. While these production cut announcements temporarily drove natural gas prices higher, they have failed to galvanize the market.”