Crude Eases Ahead of Ceasefire Expiry; Natural Gas Slips as Demand Falls

Crude eases as market evaluates upcoming ceasefire deadline

• The WTI prompt-month contract declined $0.81 to $88.80/bbl on Tuesday morning (7:30 AM CT)
• President Trump indicated Vice President Vance may travel to Pakistan for talks, while warning military action could resume if Iran fails to reach an agreement
• The move lower partially unwinds Monday’s rally, which was driven by Iran’s decision to shut the Strait of Hormuz over the weekend
• Focus has shifted to whether the current ceasefire framework will be extended or transition into a broader agreement between the US and Iran
• Amid ongoing uncertainty, leading traders warn that renewed escalation could begin to weigh more heavily on demand
• • Gunvor Group noted that demand losses could double to roughly 5 MMBbl/d next month
  • Vitol Group’s CEO estimated the conflict has already removed around 4 MMBbl/d of demand, reinforcing concerns of recessionary pressure if disruptions persist

Natural gas slips as short-lived rescom demand begins to leave

• Natural gas is down -1.2c to $2.677/MMBtu (As of 07:30 AM CDT)
• Rescom slipped around 3.5 Bcf/d this morning, as temperatures warmed
• L48 dry gas production continues to slip to new lows this month, today slipping 1.8 Bcf/d to 107.8 Bcf/d (Criterion)
• • Production losses were centered in the Northeast and Rockies regions
  • Rockies natural gas production fell nearly 200 MMcf/d to 4.53 Bcf/d (Bloomberg)
• L48 average temperatures are expected to be roughly 60 degrees for the next 3 storage weeks, including this week (Criterion)

PJM kicks off power reliability initiatives with bilateral contracting (S&P)

• To address the situation of capacity shortfall of 200 MMcf that could emerge over the next decade, PJM will allow for bilateral contracting directly with supply and load
• In letting private deals drive new generation, this can support gas prices in the region