Crude Extends Losses as Iran-Oman Talks Raise Hope for Flows; Gas Jumps as Power Burn and Feedgas Climb

Crude extends decline as Iran-Oman talks raise hopes for increased Hormuz traffic

• The WTI prompt-month contract fell $2.11 to $80.25/Bbl Wednesday morning (7:30 AM CT)
• Crude futures declined for a third consecutive session after Iran and Oman discussed establishing a “temporary joint maritime corridor” through the Strait of Hormuz
• • The two countries are expected to hold additional talks aimed at negotiating a permanent shipping route within the next 30 to 60 days
• A temporary arrangement could allow tanker traffic to increase, but uncertainty remains over whether any agreement would prove durable
• • “However, this does not change the fact that market sentiment has turned and that, in the short term, oil prices are headed lower,” said Arne Lohmann Rasmussen of A/S Global Risk Management
• Elsewhere, China said it would take “all necessary measures” to protect its interests following the US Treasury’s threat to sanction institutions that continue doing business with Iran
• Domestically, the American Petroleum Institute reported that US crude inventories increased by 4.2 MMBbl last week, with official EIA data scheduled for release later Wednesday

Gas Jumps as power burn climbs back

• Natural gas is up 5.9c to $2.829/MMBtu. (As of 07:30 AM CDT)
• Total power burn climbed over 1 Bcf/d day over day to roughly 50 Bcf/d
• L48 weather forecasts shifted warmer overnight, gaining 5.4°F (Criterion)
• Total feedgas demand jumped back to 18.5 on improved flows to Corpus

Early September forecasts are coming in hot

• The end of the 11-15 day shows a heat ridge consolidating back in the Midcon
• Early estimates for September have it at 255 CDDs, which would be 10 CDDs hotter than 30-year normal June (CWG)
• • It’s worth noting that this estimate is subject to shift a lot as we enter the month

A storm is forming in the Atlantic headed towards the carribean

• Only a few models have it turning into a hurricane as of right now, but it's still early