Crude Flat as Gulf Supply Shock Enters Third Week

Crude steady as war enters third week

• The WTI prompt-month contract fell $0.99 to $94.56/bbl on Friday morning (7:30 AM CT)
• An earlier strike on Iran’s South Pars gas field this week was followed by retaliatory attacks from Tehran targeting multiple critical energy facilities across the region
• The Trump administration’s attempt to ease WTI prices, including strategic reserve releases, have potentially contributed to a wider WTI-Brent spread, creating a divergence where Brent is on track for a weekly gain while WTI is set to decline
• • The White House is also not expected to move forward with restrictions on US oil and gas exports under the current administration
• The conflict has driven what is being described as the largest supply disruption in modern oil market history, with Gulf producers collectively shutting in roughly 10 MMbbl/d of production, according to the IEA
• • IEA Executive Director Faith Birol indicated that restoring oil and gas flows from the region could take up to six months, warning that both policymakers and markets may be underestimating the severity of the disruption
• The Islamic Revolutionary Guard Corps signaled continued missile production capability, according to Fars News Agency, suggesting the conflict could persist and pose additional risks to regional energy infrastructure

Natural gas heads for second weekly loss

• The April Henry Hub contract is down 12c this morning and about 8c this week, with prices remaining in the low $3/MMBtu range
• Lower-48 population-weighted temperatures are still forecast to be largely above the ten-year average for the next two weeks, with this month having been considerably warmer than average
• Yesterday, the EIA reported a 35 Bcf build in inventories, a relatively early injection into storage
• • Next week, a withdrawal is expected to be reported, as temperatures were cooler this week, but consistent storage injections should begin in the following weeks

Western US heatwave lifts power demand (S&P)

• A record setting heatwave in California and much of the western US has lifted demand for natural gas from the power sector
• Strong renewables have offset much of the gas power demand gains, although total load on the CAISO system has surged well above the five-year average
• The demand gains have failed to materially lift regional gas prices, with SoCal Citygate still trading at a modest discount to Henry Hub