Crude Climbs to Six-Month High on Rising US-Iran Conflict Risk; Natural Gas Higher on Weather & LNG Pull

Oil extends geopolitical risk rally

• The WTI prompt-month contract climbed $1.30 to $66.49/Bbl in Thursday morning trading (7:30 AM CT)
• Prices built on the prior session’s sharp advance as concerns grew that tensions between the US and Iran could escalate toward open conflict
• Axios reporting on Wednesday indicated a significant US military operation in the Middle East may be approaching, with Israel advocating for a strategy aimed at destabilizing Iran’s current leadership
• The expanding US military presence in the region suggests Tehran’s opportunity to secure a diplomatic resolution tied to its nuclear program may be narrowing, according to the head of the UN’s nuclear monitoring body
• • Ongoing breakdowns in key communication channels continue to shift the balance toward potential military confrontation, RBC analysts noted
• Elevated geopolitical risk is increasingly reflected in oil market positioning
• • According to Bloomberg, upside-focused options have traded at sustained premiums to downside protection for much of the year, and roughly 10 MMBbl of Brent June $100 calls reportedly changed hands midweek
• Industry data from the American Petroleum Institute indicated US commercial crude inventories declined by roughly 609 MBbls last week
• • Official government figures from the EIA are scheduled for release later Thursday following the holiday-shortened reporting week

Natural gas prompt month is up 5.0c to $3.061/MMBtu. (As of 07:45 AM CDT)

• Weather forecasts came in colder today, adding another forecasted +15 Bcf gain in demand over the two-week outlook (Criterion)
• • The largest temperature drops were centered in the Northeast and Midwest in the 11-15 day range, both losing over 20°F in this range
  • The West Coast and Rockies regions continue to warm, gaining in the 6-10 day range to partially offset the losses east of the Rockies
• LNG feedgas demand remains strong, sitting above 20.1 Bcf of demand this morning (S&P)
• • Golden Pass has ramped up above 300 Mcf/d of feedgas demand this morning

Energy Transfer’s Permian Basin pipeline could start ahead of schedule (S&P)

• Energy Transfer’s Hugh Brinson Pipeline is ahead of schedule and expected to start flows ahead of officially starting service in Q4 of this year according to executives
• • Phase one will add 1.5 Bcf/d of egress capacity from the Permian to the DFW area, this is what is expected in Q4
  • Phase two, still scheduled for Q1 2027, will increase capacity to 2.2 Bcf/d