Brent settles at $103.01 as Trump holds off on Iran, but a Gulf hurricane keeps US supply at risk
Brent crude settled at $103.01, down 1.2%, after Trump ruled out strikes on Iran before the midterms and pulled the market back from a run toward $110. But a hurricane is now heading into the Gulf of Mexico, where your refined barrels come from, so the pullback could reverse fast.
Hurricane Isaias
Isaias is approaching the Gulf, and prompt WTI already swung hard on it. Futures gained more than $3 a barrel Thursday, then gave back about $1 Friday morning. That is weather premium, not fundamentals, and it sits on top of a market already jumpy over tanker attacks in Hormuz.
For jobbers and haulers, the exposure is refining runs on the Gulf Coast. A storm that forces crews to cut rates or shut down tightens gasoline and diesel supply into the fall, and allocation could follow if units stay offline. Watch your racks before you watch the futures screen.
Gulf Coast exports shut in
This part hits your business directly. Supertanker rates to move US crude from the Gulf Coast to Asia hit about $82 million a cargo, and at those freight costs the arbitrage to Asia is effectively closed. Asian refiners who leaned on US barrels through the Iran war are turning back to the Middle East and South America, shipbrokers told Reuters.
Barrels that can't economically sail east tend to stay home. More US crude backed up on the Gulf Coast could soften domestic prices even while Brent stays bid, which may widen the discount you see on US grades. The hurricane cuts against that if it knocks out the refineries meant to run those barrels.
The $150 call
Amrita Sen at Energy Aspects told CNBC futures are disconnected from the ground in the Middle East and some physical crude should trade closer to $150 a barrel. Her read is that the market is complacent about Houthi strikes on Saudi energy infrastructure and a tanker getting hit in Hormuz about once a day.
Take it as a warning on the downside risk to supply, not a price target to buy diesel against. If Hormuz gets worse, the premium Sen is talking about shows up in your crack spreads first.
What to watch
Isaias track and intensity into the Gulf refining complex, and whether any units cut runs. Whether Trump's "productive" talk with Iran holds through the midterms or tankers keep getting hit in Hormuz. The US-Asia freight arb staying shut, which could keep more crude domestic and pressure US grades. Nat gas storage built +85 bcf last week, more than expected, so heating season sets up well supplied for now.