Crude Retreats as Memorandum is Signed; Waha Rallies as GCX Comes Online

Crude prices retreat after US-Iran agreement signed

• The WTI prompt-month contract fell $1.68 to $75.11/Bbl on Thursday morning (7:30 AM CT)
• Futures moved lower after President Trump signed a memorandum of understanding with Iran, raising expectations that traffic through the Strait of Hormuz could normalize in the coming weeks
• • According to Bloomberg, four supertankers carrying roughly 8 MMBbls of crude have either exited or are currently transiting the strait, including the first Saudi-owned vessels to make the passage since the conflict began
• Despite the improvement, Goldman Sachs estimates that crude flows through the Strait of Hormuz may recover to only about 70% of pre-conflict levels
• The EIA reported an approximately 8.3 MMBbl draw in US crude oil inventories, leaving stocks 2.7 MMBbls below year-ago levels and 51 MMBbls below the five-year average
• • Inventories at Cushing declined for an eighth consecutive week and now stand near 20 MMBbls, a level some market participants view as approaching minimum operating requirements for the storage hub

Gas inches up as power burn advances

• Natural gas is up 1.1c to $3.156/MMBtu (As of 07:30 AM CDT)
• Power burn picked up 1.7 Bcf/d back to 42 Bcf/d this morning (Criterion)
• Much of the warming in the Midcon that was expected two weeks ago didn’t materialize, however this was offset by above expectation warming in the South Central
• • Going forward two weeks, the Midcon again (specifically in states like Wisconsin, Michigan, and Illinois) is forecasted to lead temperature gains in the L48 (CWG)
  • • Much of the region is forecasted to average around 62°F today, but forecasted to reach averages of 72°F by the beginning of July

Waha gas prices trade at 4-month highs amid signs of an early GCX expansion startup

• The Waha basis prompt contract settled at -$2.7275/MMBtu, up from -$4.3525/MMBtu a week ago
• • The fixed price has also firmly entered positive territory, settling at $0.4175/MMBtu yesterday
• Although never formally announced by Kinder Morgan, the GCX startup has lifted Waha gas prices to their highest level since February
• • A Kinder Morgan rep said on June 11 that the project was on track to start late Q2 (S&P)
• According to the EIA, a capacity expansion on the 2.5 Bcf/d Blackcomb pipeline could also come as soon as the third quarter