Markets Tread Water As Hormuz Hopes Meet Red Sea Reality

Energy markets are treading water this morning after 2 days of optimistic selling ran into a reality of spreading violence overnight.

While U.S. officials continue to claim we’ll find out more about progress on a deal to restart shipping through Hormuz this week, Iran continues to deny there are any negotiations happening with the U.S., and downplay any agreement with Oman on reopening the strait between them unless they can collect tolls. It’s also unclear if the other strait coming under attack this week will need to be negotiated separately.

The Houthis claimed to have struck a Saudi tanker in the northern Red Sea Wednesday, following reports that they sunk an Indian ship off the coast of Yemen and attacked a Saudi Airport yesterday. The Saudis have been relatively quiet in their response so far, but are said to be preparing both a coalition to secure Red Sea shipping interests, and separately are making plans to launch another ground war in Yemen.

Having trouble keeping up with the chaos? The Institute for the Study of War published a special report Tuesday that provides updates on numerous facets of the conflict.

The API reported a draw of 1.2 million barrels of distillate inventories in its weekly estimate, while gasoline stocks saw a small increase of 156,000 barrels. U.S. Commercial crude stocks were said to increase by 2.7 million barrels on the week, while the SPR decreased by another 2.9 million barrels, bringing the strategic stockpile to a fresh 43 year low. The DOE’s weekly status report is due out at its normal time this morning.

Volume or margin? ARAMCO’s profit for Q2 increased by 1/3, even though volumes for the quarter were cut by more than ¼ due to the fallout from the war.

Phillips 66 continued the trend of huge gains in both its Refining and Renewables segments in Q2, while wrapping up major maintenance at its Wood River IL refinery during the quarter.

Suncor reported that its upstream segment doubled earnings year on year, while its refinery and marketing segment saw earnings grow nearly 5 fold during the quarter.

I thought they couldn’t agree on anything: California officials are calling for a new “windfall” tax on energy companies for making “too much money” during this year’s extreme environment, echoing the sentiment of the U.S. President just a day earlier.

An RBN post this week offers yet another reminder of the major factors keeping refined product prices elevated even as crude prices ease, namely 2.5 million barrels/day of refined product exports trapped behind Hormuz, and another 4-5 million barrels/day of Russian exports banned due to Ukraine’s ongoing strikes.

Speaking of which, there has not yet been a strike confirmed on Russian refineries today, although another attack on the UFA industrial hub was reported, and could end up with another refinery hit, which would make 6 in 5 days to start August if confirmed.

Multiple reports Tuesday suggest the White House is preparing to extend the Jones Act waiver for another 90 days as the administration continues to pull out all the stops to attempt to limit the damage done by high fuel prices.