Energy Markets Slide With War Rumors And Crude Inventory Builds

The energy complex is trading lower so far this morning, with the European Brent crude oil contract leading the way, exchanging hands 2.2% lower than yesterday’s settlement. RBOB and WTI are following close behind, while the prompt month HO contract drifts lower by only .36% in pre-market trading.

An unconfirmed mid-afternoon report of Iran’s leadership signaling openness to end the war sent energy prices lower yesterday. The rumor seems to be just that as Tehran continues to pummel gulf state assets, the latest round of which targeted an airport in Kuwait, a tanker off the coast of Qatar, and shrapnel from a drone interception claimed a life in the UAE.

However, the selling picked up its pace going into the settlement yesterday when news broke that China and Pakistan have presented their ideas for a ceasefire in the Iran war and a reopening of the Strait. Its somewhat surprising it took Beijing an entire month to openly engage in discussions about the Iran war given it is the largest recipient of oil that passes through the Strait of Hormuz.

The latest round of the White House’s push to contain energy prices is attempting to loosen offshore drilling restrictions due to wildlife endangerment. So far, the release of oil from the SPR, offering of maritime insurance, reinstating West Coast pipeline operations, and other, numerous bids to ease U.S. energy prices have been rendered ineffectual. It’s unlikely sacrificing a rare whale species will tilt the scale as long as the Strait of Hormuz remains closed.

The American Petroleum Institute is estimating a larger-than-expected build of 10.3 million barrels of national crude oil inventories last week, with a draw of 3.2mmb and 1mmb of gasoline and diesel stocks, respectively. The DOE’s weekly petroleum status report is due out at its regular time this morning (9:30am CDT).