Markets Climb As War And Weather Test Global Fuel Supplies

It’s another green day for energy markets as risks to the supply chain from war and weather are growing, but the relatively modest increases suggest that the market is not back in panic mode just yet.

The U.S. military completed a 10th straight day of strikes against Iran Monday evening, and Iran has reportedly retaliated with fresh attacks on a ship near the Strait of Hormuz. The Houthi’s are also signaling they’re ready to stir the pot again with an announced plan to blockade Saudi shipping as the long simmering war between those two starts to escalate again.

Despite the missiles and drones flying, all sides seem to be showing some restraint for now, with Iran not targeting Israel, Israel still sitting on the sidelines for now, the U.S. limiting its attacks and the Houthi’s not yet poking the bear that bit them last year. Whether or not this relative restraint lasts will go a long way in determining where prices go from here.

Tropical storm Bertha is heading towards the U.S. Gulf Coast with almost all of the refineries in the area currently covered by the storm’s cone of potential impacts. Fortunately, this Bertha isn’t big, and is not expected to be over water long enough to grow, which should minimize the potential damage. In the meantime, the system is expected to hit the New Orleans area tonight, before moving west on a path towards Houston over the next 2 days. Offshore oil producers are already taking measures to safely shut in operations ahead of the storm, and it would not be surprising if some of the refiners in the area take similar steps to prevent damage as it passes.

While lasting damage to facilities seems less likely from this tropical storm than it would from a major hurricane, the record amount of exports moving off the Gulf Coast will certainly be delayed by the weather, further complicating a supply chain that’s already being strained by the wars.

RIN values reached a 2-month low Monday, dropping some 25 cents from the record highs set 2 weeks ago. Last week’s EPA RIN generation report seems to be the catalyst for the pullback, with domestic RD production surging to a new all-time high as producers race to take advantage of lofty credit values. While imports of renewables are still just a fraction of what they were before the $1/gallon BTC was replaced by the Clean Fuel Producers credit that offers nothing for importers, there were some RINs generated by importers in May and June which suggest that recent values are high enough to pull some barrels into the U.S..

The EPA extended the 2026 nationwide fuel waivers last week, pushing the relaxation of RVP, RFG, butane and E15 restrictions to August 8, with more extensions expected through the end of the summer. A bill to permanently allow for E15 to be sold through the summer is still held up in the senate after being passed by the house 2 months ago, which is continuing to limit the adoption of that blend by retailers who are leery of another government head fake. Meanwhile, a handful of retailers who took advantage of the government funding to add E15 blending capabilities years ago before the “higher blends” incentive program ended are now enjoying an additional windfall.