Crude Cools Despite Escalation at Iran's Main Export Hub; Gas Edges Lower as Cold Front Looks Brief

Crude cools despite strikes on Kharg Island

• The WTI prompt-month contract fell $2.83 to $95.88/bbl on Monday morning (7:30 AM CT)
• The US said late Friday that it had carried out strikes on military facilities on Kharg Island, Iran’s primary crude export terminal, though Iran’s Fars News Agency reported that shipments from the island were still continuing
• When asked about potential negotiations between Washington and Tehran, President Trump said the US is in communication with Iranian officials but questioned whether Iran is “ready” to engage
• • Iran’s foreign minister said Tehran has not sought a ceasefire and has not delivered messages suggesting it wants to halt the conflict
• President Trump also said he is “demanding” that other countries assist with protecting shipping through the Strait of Hormuz, which remains effectively closed to most oil tanker traffic but concrete plans have yet to materialize
• • US Energy Secretary Chris Wright said only days ago that naval escort operations are unlikely to begin immediately and could take until later in the month to organize
• In the meantime traders are closely monitoring vessel movements through the region, with only a small number of tankers managing to transit the strait so far, far below normal flows and insufficient to calm market concerns
• Meanwhile, oil loading at the key UAE export hub of Fujairah has resumed after a second drone strike in three days
• • However, UAE crude output has fallen to roughly 2 MMbbl/d from 3.56 MMbbl/d last month, according to Bloomberg estimates

Natural gas prompt month is down -1.6c to $3.115/MMBtu. (As of 07:30 AM CT)

• Colder weather swept across the nation this weekend which has pushed Rescom and Power demand higher
• • Power Burn is up across the nation from Friday, up 2.7 Bcf/d (S&P)
  • • Canadian Imports rose slightly as L48 temperatures fell
  • This is expected to last a couple of days before returning to warmer conditions
  • Tomorrow will bring this cold-front’s peak cold, with L48 population weighted forecasted temperatures at 45°F(Criterion)
• This morning’s weather forecast shows lower temperatures east of the Rockies, with a total L48 population weighted temperature loss of 6.3°F (Criterion)
• LNG feedgas demand is at 20.4 Bcf/d, up 0.4 Bcf/d from Friday
• • The uptick in feedgas demand was driven by gains in the Gulf Coast Fleet, with Sabine Pass up over 0.2 Bcf/d

Shell prioritizes LNG, expects robust LNG growth in the long term (Bloomberg)

• In response to shareholders, Shell states they see Global LNG demand rising by 54% by 2040