Energy Futures Cool Off Despite Mounting Geopolitical Uncertainty

Energy futures are taking a breather this morning with selling action that seems more like profit-taking rather than the result of an easing of geopolitical conflict(s). RBOB and HO are both shedding over 10 cents so far this morning while Brent and WTI drop nearly $3 each. The prompt month Brent contract has failed to hold above the psychologically-important $100 level it settled above yesterday.

If anything, the major headlines this morning lean more bullish: U.S. conducts 13th consecutive night of strikes in Iran, the White House is claiming to be considering a ‘massive attack’, and the EU announced its 21st round of sanctions targeting Russia’s oil industry.

Two tankers laden with Saudi oil traversed the Bab-al-Mandeb Strait yesterday, despite claims from Yemeni Houhi Rebels that they have blockaded the waterway. The Strait lies at the southern end of the Arabian Peninsula and separates the Red Sea and the Gulf of Aden/Arabian Sea, and will likely continue to make headlines as oil producers continue to search for alternatives to shipping through the Strait of Hormuz.

The remnants of Tropical Storm Bertha dissipated last night as it made landfall between Houston and Corpus Christi, and it doesn’t seem to have affected any energy infrastructure in the area. Refiners along the coast are breathing a sigh of relief as the second named storm passed over 40% of the nations refining capacity without causing any major hiccups. The season is young, however, with peak hurricane activity typically coming around September, but forecasts still expect it to be slow on account of the El Nino in the Pacific.

RIN values have bounced back from the 2-month lows they set back on Tuesday. The RIN generation report published by the EPA last week showed a sharp uptick in domestic RD/D4 RIN production, causing prices to crater some 25 cents under the all-time highs seen a couple weeks ago. It seems like some have come back to the reality even with increased productions, the RFS’s obligated parties are still on track to fall short of the 2026 mandate.