Crude Extends Rally as Hormuz Supply Risks Increase; Gas Retreats as West Cools and TS Edouard Looms

Crude extends rally as Hormuz supply risks increase

• The WTI prompt-month contract rose $2.19 to $87.95/Bbl Tuesday morning (7:30 AM CT)
• Crude futures moved higher as two oil supertankers were reportedly struck by projectiles while attempting to exit the Strait of Hormuz
• The tanker attacks followed a renewed escalation between the US and Iran over the weekend, with US forces striking an island in the strait before Iran retaliated with attacks on the UAE and Jordan
• CENTCOM has maintained a limited but relatively steady flow of maritime traffic through the strait, primarily consisting of crude shipments, while clearing Iranian mines and enforcing the naval blockade
• • The latest exchange of US and Iranian strikes now threatens the fragile shipping recovery and raises the risk of further disruptions to regional crude exports
• Bloomberg data indicate that Hormuz crossings have declined recently, with outside estimates suggesting only 2–4 MMBbl/d is passing through the waterway compared with the US administration’s estimate of 8–10 MMBbl/d
• The Bal 2026 strip is trading near $84.05/Bbl, while the Cal 2027 strip is trading around $73.70/Bbl (8:20 AM CT)

Gas falls on cooling in the Western L48

• Natural gas is down -6.2c to $2.873/MMBtu (As of 07:30 AM CDT)
• Overall L48 forecast shifts were mild day over day, with the West and Rockies regions more than offsetting gains across the Midwest and Southeast
• • The L48 lost roughly 4°F across the forecast range this morning
• Average forecast range daily temperatures regulated a bit, but are still expected to start September hotter than the 10-year normal (Criterion)

Tropical Storm Edouard to make landfall this evening

• The storm is headed towards the Texas Louisiana border, its path is a direct hit for Sabine Pass, Golden Pass, and the under-construction Port Arthur facility
• The storm doesn’t pose much risk in the way of Power loss and wind
• • Sabine and Golden Pass have onsite power generation, while freeport and Cameron are the gulf terminals exposed to outside grid failures
  • LNG facilities should be able to withstand winds up to 150+ Mph, but loadings may be temporarily impacted
• The storm may pose some risk to the surrounding infrastructure and channel obstructions
• While the storm isn’t expected to be powerful enough to cause medium to long-term damage, some short-term demand loss is possible