After starting the day with a run higher, prices reversed and dropped below $68/bbl yesterday. After a slow start this morning, prices are beginning to cautiously make progress higher. Crude prices are currently $68.62, picking up 73 cents (1.1%) this morning.
Unlike crude, fuel prices managed to hold onto their gains yesterday, with diesel picking up a penny and gasoline up 2.2 cents. This morning, both products continue to rise. Diesel prices are trading at $2.1457, up 2.8 cents (1.3%). Gasoline has surpassed the $2.10 threshold for the first time in almost two weeks, picking up 2.8 cents (1.3%) to trade at $2.1189.
Crude markets reversed yesterday as fears of a U.S.-Iran conflict simmered down. While both presidents shared ominous threats, follow-through is unlikely. In fact, the USS Truman, an aircraft carrier that normally patrols the Mediterranean, docked in Norfolk this weekend – far away from the unguarded Arab Gulf and Strait of Hormuz that has been threatened by Iran. Until military posturing begins to support exchanged threats, any conflict will appear unlikely. War in the Middle East would certainly cause prices to skyrocket, but as long as the situation appears stable prices can maintain a lower level.
Nearby, Saudi Arabia announced they cut their exports this month after a large increase last month. The Saudis had agreed to increase output in response to declining Iranian exports, but Saudi Arabia claims there wasn’t enough demand at the moment to absorb the supply increase. That’s not too surprising right now – Iran sanctions don’t take full effect until November, so Iranian oil is still on the market for now. But if Saudi Arabia’s output levels return to their post-June levels, oil markets could take it as a sign the country isn’t filling in the supply gap, which could cause prices to rise. Either way, the fact that Saudi Arabia is acting as a responsive swing producer ought to help give markets a bit of stability for a little while.