Crude Rises as Iran Ramps up Vessel Strikes; Gas Surges as Heating Demand Spikes in Forecast

Crude rises as Hormuz attacks threaten flow recovery

• The WTI prompt-month contract rose $0.73 to $90.17/Bbl Wednesday morning (7:30 AM CT)
• The Cal 2027 strip briefly reached $81/Bbl before paring some gains
• The UKMTO has reported at least nine vessel attacks in the Strait of Hormuz since the beginning of October
• We previously flagged increased Iranian attacks as a key upside risk as Tehran looks to regain leverage following the recent recovery in traffic through the strait
• Shell CEO Wael Sawan said Middle East oil flows have recovered to roughly 80% of pre-conflict volumes, while some banks estimate that exports have returned closer to prewar levels
• Despite the recovery, oil executives have questioned how long the shipping workarounds supporting higher flows can remain effective
• • “We have maybe softened the worst impact of the crisis, but there is only so long that you can continue to do that without further discontinuities emerging,” said Sawan
• Vitol CEO Russell Hardy called the ship-to-ship transfer system inefficient because it relies on one group of tankers shuttling through Hormuz before transferring cargoes to vessels waiting in the Gulf of Oman
• • The system has reduced tanker availability, driven freight rates sharply higher and made it increasingly difficult for traders and refiners to calculate the delivered cost of crude

Gas surges on heavy cooling in key demand regions

• Natural gas is up 8.0c to $3.194/MMBtu (As of 07:30 AM CDT)
• L48 forecast models cooled around 16°F overall this morning, with most of the cooling coming in the Northeast and Midwest in the 5-15 day range of the forecast
• Temperatures are now forecast to average 61.1°F for the week ending 10/23
• • This is associated with a 25 Bcf upward demand revision (Criterion)
• The model still expects CDDs until 10/13, after which the L48 is expected to flip into HDDs

The tropical depression has now been named Tropical Storm Isaias

• The risk of the storm turning into a major hurricane has increased
• Its course remains fixed on the eastern gulf
• While it may impact some gulf production, power outages could more than offset small production losses in the gulf