Oil prices are trying to stage a rebound after a late-day petroleum price swoon on concerns that an oil tanker in the Strait of Hormuz has gone missing. Reports that oil production and refinery operations are starting to come back online in the aftermath of Tropical Storm Barry was the main reason for the weakness, yet the impact from the storm will be felt in the inventory data for weeks to come. Oil had also felt pressure from talk that tensions may be easing with Iran after Iran said it was open to talks with the U.S. if we lift sanctions, and there’s also talk that the UK would release the Iranian oil tanker they had in custody, if they were assured by Iran that it was not headed to Libya. Yet reports of a missing UAE oil tanker, that may be in custody of Iran, may start to put some Iranian risk premium back into the market. Dude, where’s my tanker?
Iran’s Ayatollah Ali Khamenei did not seem to be in the mood for negotiation with the UK. He called the seizure of an Iranian tanker by British authorities "piracy" in a televised speech today saying: "God willing, the Islamic Republic and its committed forces will not leave this evil without a response." Well, maybe they have already responded. The AP is reporting that “Tracking data shows an oil tanker based in the United Arab Emirates traveling through the Strait of Hormuz drifted off into Iranian waters and stopped transmitting its location over two days ago, raising concerns about its status amid heightened tensions between Iran and the U.S. It's not immediately clear what happened to the Panamanian-flagged oil tanker Riah late on Saturday night. However, Capt. Ranjith Raja of the data firm Refinitiv told The Associated Press on Tuesday that the tanker hadn't switched off its tracking in three months of trips around the UAE. Raja said: "That is a red flag." Iranian officials haven't said anything publicly about the ship, nor have officials in the UAE. The U.S. Navy's 5th Fleet, which oversees Mideast waters, declined to immediately comment.”
So, it is possible that the reason Iran’s Ayatollah Ali Khamenei is spouting off that they will respond to the UK attack, is the possibility they already have a tanker in custody. One that they might want to trade. One Iran tanker for a UAE tanker and perhaps a tanker to be named later.
As of yesterday, the BSEE reports that approximately 69.08 percent of the current oil production in the Gulf of Mexico has been shut-in, which equates to 1,305,558 barrels of oil per day. It is also estimated that approximately 60.58 percent of the natural gas production, or 1,684.20 million cubic feet per day in the Gulf of Mexico has been shut-in. That number should improve today. Platts reports that Commercial crude stocks will likely fall by around 4.2 million barrels to 454.8 million barrels during the week ended July 12, according to analysts surveyed by Platts. The draw would leave stocks 5.1% above the five-year average of U.S. Energy Information Administration data, in from 5.5% during the week prior. Platts says that the storm likely also had an impact on refinery runs last week after Phillips 66 (NYSE:PSX) completed a shutdown of ordinary operations at its 294,700 b/d Alliance Refinery ahead of the storm Friday morning. Total refinery utilization was expected to fall back about 0.5 percentage point to 94.2% of total capacity last week, analysts said, putting run rates at about par with both the same period last year and the five-year average. Refinery utilization had been holding above average since late-May but has trailed year-ago levels since January. A corresponding storm-related slide in export volumes likely blunted crude draws last week. Total crude exports were estimated by cFlow, Platts trade flow software, at a 23-week low 2.3 million b/d last week, down around 750,000 b/d from an EIA-reported 3.05 million b/d during the week prior.
Platts says that crude loadings across the central U.S Gulf Coast were sharply lower last week as area ports were either closed or operating under restrictions due to the approaching storm. Exports from the Southwest Passage Lightering zone, located at the mouth of the Mississippi River, dropped to zero last week from 1.1 million barrels the week prior, cFlow data showed. Loadings at Port Arthur, Texas, located around 100 miles west of Barry's landfall, were down by nearly half last week at 1.6 million barrels. Total exports at LOOP were up around 500,000 barrels at 2.7 million barrels last week due primarily to the loading of a 2 million-barrel VLCC cargo days before the storm's mid-week arrival in the Gulf. No loadings were reported at the port during the second half of last week.
Distillate stocks likely edged around 300,000 barrels higher last week to 130.8 million barrels as Hurricane Barry-related shipping slowdowns likely pushed barrels into storage. The build would widen the inventory deficit to the five-year average to around 5.4%, likely snapping a two-week narrowing trend. Distillate exports averaged at 1.45 million b/d during the week-ended July 5, according to EIA.
Behind it all the Fed has the crude bull’s back. More Fed speak today and a talk from none other than Fed Chair Jerome Powell himself should add support as the dovish policy talk will more than likely continue.
Not hot enough for natural gas yesterday. It seems record production and power outages from Tropical Storm Barry and New York hurt demand just enough.