Crude Oil Futures Leading Energy Complex Higher

Crude oil futures are leading the energy complex higher this morning, trading up nearly 3% as traders weigh the potential response from Israel to Iran’s missile attack carried out yesterday. In response to the recent attacks involving 80s-era technology sabotage and airstrike assassinations, Iran fired around 180 ballistic missiles yesterday, the vast majority of which were intercepted by Israel’s Iron Dome defense. Those that got through reportedly only caused minimal damage, but the question remains as to how “severe” the retaliation from Israel, and its allies, will be.

Tuesday afternoon, the American Petroleum Institute reported a 1.5 million barrel drop in national crude oil inventories for last week, accompanied by a 2.7mmb drop in diesel stocks and a slight build of 900,000 barrels of gasoline. A confirmation of this drop by the Department of Energy’s official report, due out at 9:30 am CDT today, could add further bullish sentiment to war-spooked petroleum futures. On the bearish side, Saudi Arabia threatened warned those OPEC members that $50 crude oil was a tangible price level if mandated production cuts continue to be skirted.

The DOE has purchased oil for the SPR every month this year and just bought 6 million more barrels to be delivered through May of next year, although the stockpiles are still at a fraction of where they were when the releases began. The department drew down the reserve following COVID and the Ukraine invasion to curb fuel price increases and has bought back at an average of around $77/bbl so far, with the most recent at $68/bbl. However, there’s only enough room in their budget to buy about 2 million more barrels at current prices without congressional intervention.

The ILA has been advocating for higher wages and restrictions on automation projects threatening job security for the first time in almost 50 years, US dockworkers went on strike yesterday at ports along the East and Gulf Coasts after a midnight deadline for negotiations passed without a new agreement. Although a strike of this scale could have serious economic consequences, the petroleum industry expects no immediate impact as this dispute involves a separate group of port workers.