Crude Rises as Iran Escalates Attacks on Regional Shipping; Gas Gains as Forecasted Temperatures Cool

Crude rises as Iran escalates attacks on regional shipping

• The WTI prompt-month contract rose $1.32 to $95.46/Bbl Wednesday morning (7:30 AM CT)
• The Cal 2027 and Cal 2028 strips also moved higher this morning, trading above $85/Bbl and $75/Bbl, respectively
• Reuters reported that Iran is deploying new tactics against ships traveling through the Strait of Hormuz as Tehran seeks to keep oil prices elevated ahead of the US midterm elections
• • The attacks have expanded beyond the strait into the Gulf of Oman and waters near Qatar and the UAE
• The escalation threatens the recent recovery in Gulf production and exports
• • Saudi Arabia reported to OPEC that its crude production increased by more than 2 MMBbl/d to 8.372 MMBbl/d in September
• The Houthis also continue to target Saudi Arabia, increasing risks to the kingdom’s energy infrastructure and critical export routes
• • The group claimed an attack on Saudi Aramco’s headquarters in Dhahran, where a strike caused a fire at an administrative building
• Meanwhile, the IEA lowered its 2027 world oil demand forecast to 104.4 MMBbl/d from 105 MMBbl/d as high fuel prices and economic uncertainty weigh on consumption

Gas gains as forecasted temperatures cool

• Natural gas is down -4.6c to $3.237/MMBtu (As of 07:30 AM CDT)
• The L48 lost heat in the forecast this morning after consecutive days of warming, bringing the overall average temperatures in a range at or below average for the remainder of the month
• The cooling was led by the regions east of the Rockies, primarily the South Central
• • Texas, for example, has still been comfortably in cooling demand season throughout October, averaging around 12 Bcf of power demand per day but only 1.3 Bcf of rescom demand for the first two weeks of October (S&P)
  • • Given this, the effect of cooling in the forecast to weather driven demand is muted relative to temperature drops like this seen in mid-Winter season, with Criterion only showing a 2.7 Bcf drop in forecasted weather driven demand day over day
• According to CWG data, this weekend will be the first days of the month with national average temperatures below the 10-year average, with temperature anomalies hovering 3-4°F below the 10-year average
• Much of the Midwest and Northeast are under frost/freeze warnings, with temperatures expected to drop well below 40°F this weekend

L48 production has been volatile

• Yesterday, production was set to set a fresh two-week low in early cycle noms, however it was revised much higher in late cycle noms, up 2.5 Bcf/d
• This morning’s early cycle shows another large drop of 1.1 Bcf/d led by South Central losses of 1.6 Bcf/d

LNG feedgas demand strength holds steady

• The current weekly average of 19.8 Bcf/d runs well above last week’s levels of 18.6 Bcf/d (Criterion)