Mid-Week Review

Oil Rises as Supply Risks Ripple Through Mideast, Great Plains

Oil climbed for a second day as supply risks from the Middle East to the U.S. Great Plains overwhelmed concerns that trade tensions will swamp energy demand. In the Middle East, a Saudi-led coalition claimed that it had foiled 35 terror attacks by Yemen’s Houthi rebels in the Bab al-Mandeb Strait between Yemen and Djibouti. Flooding across the central U.S. also posed potential disruptions to crude and refined products flows, said RJO’s Streible. Part of the Pony Express crude pipeline system to a key storage complex in Cushing, Oklahoma, was shut down last week.

Report: India May Resume Iranian Oil Purchases

After India’s Prime Minister Narendra Modi won the country’s elections, the government will immediately begin negotiations with Iran to pay in rupees for Iranian oil to bypass U.S. sanctions, Indian news outlet ThePrint reported on Tuesday, citing two government sources. After Modi won the elections, the government is now keen to discuss non-dollar payments and steps that would allow it to resume purchasing oil from Iran, according to ThePrint’s sources. India is keen to resume imports from Iran, although the quantity may be limited, a senior government official told ThePrint, adding that Iran’s Pasargad Bank, which has been authorized to open a branch in India, could be used for the payments.

U.S. refiners face summer snags amid heavy oil shortage

In the Gulf Coast, dwindling heavy oil supplies have suppressed refining margins, while Midwest refiners may not reach the high run rates seen last summer. Gulf Coast profits from coking — a process where heavy crude is broken down into fuels such as gasoline and diesel — are already at their lowest levels in nearly a decade, according to data from Oil Analytics Ltd. The decline comes as a loss of crude supply from sanctions-hit Venezuela and Iran, as well as production cuts by Canada and OPEC, have driven up the price of fuel oil, which is used to make gasoline through the coking process. Gulf Coast fuel oil, a byproduct of heavy crude, reached a six-month high in late April.

Is The Oil Glut Coming Back?

Oil fell along with everything else, as the gravity of the escalating U.S.-China trade war began to sink in. Adding to the meltdown was likely a shift out of net-long positions by speculators. “This is a very flows-driven market right now,” Scott Shelton, a broker at ICAP PLC, told the Wall Street Journal. After a series of supply outages and tension in the Middle East, oil failed to break higher, likely leading to a shift in sentiment. “You just threw everything bullish you basically could at the market, and nothing happened.”