Oil Extends Gains as Middle East War Threatens Energy Flows

Oil rises as US-Iran war continues to stress energy supplies

• The WTI prompt-month contract rose $2.29 to $76.95 on Thursday morning (7:30 AM CT)
• Crude prices advanced as the escalating conflict in the Middle East continues to disrupt key energy flows across the region
• China’s government has instructed the country’s largest refiners to halt exports of diesel and gasoline, signaling a move to safeguard domestic fuel supplies that could tighten availability for overseas consumers
• • Although China operates one of the world’s largest refining systems, most of its output is directed toward meeting internal demand, limiting its role as a major supplier to global markets
• The market’s primary focus remains the Strait of Hormuz, though Iranian military commander Amir Heydari said on state television that Iran “does not believe in closing” the vital shipping corridor
• • Despite those comments, Iran’s Revolutionary Guards said Thursday that they struck a US tanker in the northern Gulf, with the vessel reportedly catching fire
  • The Guards also stated that during wartime the Islamic Republic would exercise control over transit through the waterway
• Ship-tracking data compiled by Bloomberg indicate traffic through the strait has collapsed by more than 95%, as large crude carriers and LNG vessels steer clear of the area
• • The limited number of ships still departing the Gulf are reportedly sailing with location transponders switched off, a tactic often used by vessels operating in active conflict zones

Natural gas prompt month is up 4.2c to $2.959/MMBtu. (As of 07:21 AM CT)

• Markets are slightly up, weighing warm forecasts with production declines and expected storage withdrawals
• There was slight warming across the L48, partially offset by continues losses late in the forecast period for the Northeast
• • Temperatures are currently around 7°F above the 10 year average, but are expected to drop below late next week into mid-march (Criterion)
• L48 production dropped this morning to 110.3 Bcf/d
• • Production dropped over -0.5 Bcf/d, and CAD imports fell a further -0.4 Bcf/d to a two year low of 4.0 Bcf/d
• Today’s storage report has an average withdrawal estimate of -124.5 Bcf (Bloomberg)

Data centers drive power costs much higher across the PJM (S&P)

• In the last three capacity auctions, $23 Billion in additional costs were added according to the President of Monitoring Analytics
• • He attributes the rise in these costs to data centers
• The PJM market is projected to have an annual increase of 13 gigawatts of new load growth