Crude Plummets on US-Iran Framework Peace Deal

Crude plummets as US-Iran deal eases supply concerns

• The WTI prompt-month contract fell $4.76 to $80.12/Bbl on Monday morning (7:41 AM CT)
• The US and Iran announced an interim agreement aimed at restoring commercial traffic through the Strait of Hormuz
• Iran’s state-affiliated Fars news agency reported that vessels will be permitted to transit the waterway without restrictions for 60 days, after which Tehran plans to impose “navigation service” fees
• Despite the announcement, shipping industry participants cautioned that several aspects of the agreement remain unresolved before normal maritime operations can fully resume
• The shipping association BIMCO said additional clarity is needed on security arrangements and implementation details before the route can be considered low risk
• “The market often views a reopening as an immediate event, but the reality is far more gradual,” said Haris Khurshid
• • He added that while oil shipments may recover relatively quickly, rebuilding confidence among shippers and insurers is likely to take considerably longer

Gas falls as power demand is crushed

• Natural gas is down -4.1c to $3.079/MMBtu (As of 07:41 AM CDT)
• Power burns slid over 7.1 Bcf/d from Friday down to 38.1 Bcf/d (Criterion)
• Weather forecasts were mixed this morning, lead by cooling in the Midwest partially offset by warming in the West (CWG)

Texas grid operator forecasts new record peakload (S&P)

• ERCOT forecasted a potential 90.4 GW peak this summer, exceeding the current record by almost 5 GW
• In terms of weather, the closest summer to this one has been 2023, which had low wind output and hot weather
• • Some models show most of Texas likely to have temperatures 1-4°F higher than average
  • Since June began, ERCOT wind generation has been relatively average (CWG)
• Non-weather factors like population growth and data center build out also are contributing to load growth in ERCOT

A framework peace deal has been announced between the US-Iran

• This has little to no effect on prompt gas, but may dissuade some Permian associated gas growth in the medium to long term