Oil continued sliding yesterday after trading briefly higher in the morning. The decline is partially a response to Tropical Storm Barry’s non-event for petroleum infrastructure, and despite on-going escalation in Iran, markets are still creeping down. Crude oil is currently trading at $55.29, down a penny.

Fuel prices are up or flat with diesel trading at $1.8791, up 1.7 cents.  Gasoline is flat, trading at $1.8351.

Yesterday the US shot down what they claimed was an Iranian drone that was threatening a US vessel, though the Iranians claimed they have not lost any drones. The event reportedly occurred in the Strait of Hormuz, adding further to concerns that the key oil chokepoint has become a dangerous region. On the flip side, Iran’s Foreign Minister Zarif has offered a nuclear deal with stricter nuclear inspections on the condition that sanctions are permanently lifted. Trump, though, has been pushing a stricter stance around other programs including their ballistic missile program, so the offer may prove a non-starter.

Saudi Arabia’s government budget was projected to be at a 6.5% deficit according to an IMF report, highlighting the affects of lower oil prices on the country’s budget. While the country has outwardly stated that $70 is the target, the analysis indicates that $60-$65 Brent crude levels are sufficient to keep the country’s budget nearly balanced. Understanding Saudi Arabia’s oil price requirements helps inform a solid understanding of OPEC strategy – as the leading nation, the Saudis will continue to push for at least enough cuts to keep prices in the range they’re in today, if not slightly higher.