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Crude Advances as US Dismisses Iran Peace Framework

Crude advances after US dismisses Iran’s latest peace framework

  • The WTI prompt-month contract gained $1.65 to $97.07/Bbl on Monday morning (7:30 AM CT)
  • Crude futures moved higher after President Trump rejected Iran’s latest response to US peace terms, extending uncertainty around any meaningful reopening of the Strait of Hormuz
  • Market concerns are increasingly shifting toward the possibility of a renewed military escalation, with some analysts discussing a limited US-led air and missile campaign targeting Iranian military infrastructure, energy facilities, and export assets while maintaining maritime restrictions in the region
    • Potential military action involving Kharg Island could further reduce Iranian crude exports, while possible Houthi attacks near Bab el-Mandeb or Iranian strikes targeting Saudi Arabia’s East-West pipeline could pressure alternative export routes that have partially offset lost Hormuz flows
  • Analysts are increasingly describing the US-Iran conflict as a prolonged geopolitical standoff characterized by intermittent periods of heavier fighting layered on top of sustained low-level disruptions, with the Strait expected to remain restricted or only partially operational for an extended period
  • A Goldman Sachs market survey showed most respondents expect disruptions to Strait of Hormuz transit to continue beyond the end of June
  • The Cal 2027 strip is nearing $75/Bbl as the market increasingly prices in a longer-lasting disruption scenario, aligning with comments from Aramco’s CEO that prolonged constraints on Strait of Hormuz transit could postpone a broader rebalancing of global oil markets until 2027

Natural gas moves up as L48 approaches Summer

  • Natural gas is up 6.8c to $2.825/MMBtu (As of 07:30 AM CDT)
  • The L48 population weighted average temperatures over the next 14 days gained a combined 11.5°F
    • The temperature gains were primarily in the 6-10 day range, where we’re expected to average over 70°F for the first time over the weekend (Criterion)
  • Bossier Formation triples in estimated recoverable natural gas resources (NGI)
    • USGS assessed the Bossier for the first time since 2016, and the new assessment found 343.5 Tcf in the Bossier
    • This is much higher than the last assessment, which came in at 108.6 Tcf
  • Targa expects increased Permian Basin gas volumes after shut-ins end (S&P)
    • 200-400 MMcf/d of Permian gas remains shut in due to weak pricing, but with Blackcomb and Hugh Brinson coming on later this year, targa expects a material recovery
    • Targa continues expanding Permian infrastructure, signaling confidence in the long-term growth of the basin despite current gas takeaway constraints

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