Energy Markets Rebound Amid Hormuz Uncertainty And Conflicting Reports

Energy markets are back on the climb Wednesday after another wild session Tuesday highlighted by lots of talk, but no actual movement of tankers through the Strait of Hormuz while 3 more vessels were reportedly struck by Iran overnight.

Tuesday’s biggest head fake came from after the U.S. Secretary of Energy posted that the U.S. Navy had escorted an oil tanker through the Strait of Hormuz. WTI was down $18 for the day and ULSD prices were down more than 45 cents not long after that news, but reversed course when it became clear that actually didn’t happen, and other reports surfaced that Iran was preparing to deploy mines in the strait.

The DOE raised its outlook for fuel prices in its monthly Short Term Energy Outlook Tuesday, raising its target for Brent crude this year by 37% and its 2027 forecast by 22% following the fallout from the war.

The API reported modest inventory draws across the board last week with oil inventories down 1.7 million barrels, gasoline down 1.8 million barrels, and distillates down 2.3 million. The DOE’s weekly update is due out at its normal time today.

The IEA continues to push for the largest SPR release in history to limit the fallout from the war, but so far member countries have not agreed to make that move.

The U.S. President announced overnight that India’s largest refiner was investing in a project to build a new 500mb/day refinery in Brownsville TX. Details on the deal were scarce, but keep in mind the U.S. treasury also just gave India’s refiners a respite from sanctions on buying discounted Russian oil. The President said this will be the first refinery built in the U.S. in 50 years. The Department of Energy meanwhile has a list of 13 refineries built during that time, although none of them are of large capacity. News reports also suggest this hypothetical refinery was “open” when in reality, the groundbreaking on the plant hasn’t even begun and a refinery of this size would take 3 years or more to come online if it moves forward. You can read more about the plans for this plant here.