Markets are rebounding from yesterday’s heavy losses following reports of renewed concerns on Middle East stability. Crude, which fell as low as $50.72 yesterday, ended the day with $2/bbl losses. This morning, crude is trading at $52.21, up $1.07.
Fuel prices are also bouncing back this morning. Yesterday saw diesel prices down over 4 cents and gasoline down a whopping 7 cents. Today, diesel is trading at $1.8071, up 2.7 cents from yesterday’s close. Gasoline is trading at $1.7129, also up 2.7 cents.
Markets received a quick boost this morning after news that two oil tankers were attacked in the Gulf of Oman early this morning. Early signs point towards a state actor behind the attacks, though the most likely culprit, Iran, has so far denied involvement. The attack occurred near the Strait of Hormuz, labelled by the EIA as the most critical global oil chokepoint in the world since it facilitates 30% of all maritime oil shipments. Coming just a month after attacks on Saudi ships in the area, the attacks will certainly force shippers in the region to use caution, potentially slowing shipments of oil. Depending on who ultimately takes credit for the attack, it could also lead to further escalations of Middle Eastern tensions.
The EIA’s report helped to cool market concerns of oversupply. Although crude stocks did surprise markets with a build, that build was half the size of the API’s reported build. Diesel, conversely, showed a surprise draw. Refinery utilization continues clawing higher, up 1.4 percentage points to 93.2%. Gasoline demand picked up sharply for the week with a 400 kbpd increase, perhaps a sign of a strong summer driving season to come.