Oil is trading sharply higher this morning thanks to strengthening equity markets, particularly in Asian markets. Crude is currently trading at $60.05, up $1.23 (2.1%) since yesterday’s close.
Fuel prices are also getting a boost, especially gasoline. In fact, gasoline and diesel prices are trading within just a few cents of each other, a far cry from the 40-cent spreads seen during the winter. Gasoline is currently trading at $1.9683, up 3.0 cents (1.6%) above Monday’s close. Diesel prices are trading at $1.9880, up 0.8 cents (0.4%).
As we approach the expiration date of Iran sanction waivers, major buyers are beginning to appeal for extensions. South Korean officials are visiting Washington this week to discuss extending waivers. The country claims there are few alternative suppliers who can supply comparable product quality. US officials are not in agreement over the matter – particularly concerning whether oil prices or Iran sanctions should be the highest priority. In the next few weeks, the Trump administration will have to make the decision between putting pressure on the Iranian regime and keeping oil prices lower.
Today the Houston Shipping Channel is beginning to reopen after a chemical spill closed the key shipping lane. The Channel was closed on Friday afternoon after a fuel terminal caught fire, affecting 11 different fuel storage tanks. Over 60 vessels were delayed in entering and leaving the area, with oil tankers among them. Houston is no stranger to shipping delays – fog often shuts down shipping for a couple days – but the unexpected nature of the outage had some worried. Over the weekend, harmful air pollutants were released in the towns around the terminal, creating some localized panic over health conditions. The estimated cost of the Channel closure are estimated to be upwards of $1 BN, including clean-up, repairs and lost economic opportunity.