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War = ANS upper $70s
Israeli attack on Iran nuclear facilities ups prices to five-month high
Steve Sutherlin Petroleum News
Alaska North Slope crude exploded into the upper $70s June 13 on news that Israel had struck nuclear facilities and other targets in Iran in a surprise attack, propelling the Alaska benchmark $4.32 skyward to close at $77.69 per barrel. West Texas Intermediate launched $4.94 to close at $72.98 and Brent popped $4.87 to close at $74.23. The gains were the largest one-day rise since March 2022.
The United States denied involvement in the attacks.
"Tonight, Israel took unilateral action against Iran," Secretary of State Marco Rubio said in a statement released late on June 13. "We are not involved in strikes against Iran and our top priority is protecting American forces in the region."
Numerous analysts saw the war premium prices as unsustainable, due to their basis in geopolitical fears -- juxtaposed against some weakening economic indicators, potential inflation from trade wars and excess capacity amongst cartel members.
That view was not unanimous. Barron's reported that Gavekal research director Tom Holland said in a note that hopes of benchmark prices returning to $60 a barrel or less "must now be buried."
Holland said Netanyahu's statement that the attacks would continue meant "this time was different" than previous battles between Israel and Iran.
In another red-letter day over the week ended June 18, ANS posted a June 17 surge of $3.54 to close on the brink of $80 at $79.84. WTI surged $3.07 to close at $74.84 and Brent surged $3.22 to close at $76.45.
The rally was charged by warnings from Israel and the Trump administration for residents of Teheran to evacuate the city.
For ANS, June 17 marked a five-month high, hit despite profit-taking on June 16. ANS closed at $80.42 Jan. 15.
On June 16, ANS fell $1.39 to close at $76.30, WTI fell $1.21 to close at $71.77 and Brent fell a dollar to close at $73.23.
ANS also fell June 12, down 31 cents to close at $73.37, as WTI slid 11 cents to close at $68.04 and Brent dropped 41 cents to close at $69.36.
Massive US inventory drop Trading on June 18 was subdued, as traders contemplated potential outcomes for Israel/Iran hostilities.
WTI and Brent slid in early trading June 18, however both rose modestly into the close. WTI added 30 cents to close at $75.14, and Brent closed at $76.70, up 25 cents. ANS prices were not yet released as Petroleum News went to press on June 19.
President Trump on June 18 considered possible direct support for Israel's war effort, giving a bullish boost to geopolitical tension worries.
A massive drop in U.S. commercial crude inventories failed to ignite an equally large price gain June 18. Prices were held in check after an announcement by President Trump that Iran wanted to come to the negotiating table.
U.S. inventories for the week ended June 13 plummeted by 11.5 million barrels from the previous week to 420.9 million barrels, 10% below the five-year average for the time of year, the according to data from the U.S. Energy Information released June 18.
Total motor gasoline inventories increased by 0.2 million barrels over the period, to 230.0 million barrels -- 2% below the five-year average for the time of year, the EIA said. Distillate fuel inventories increased by 0.5 million barrels to 109.4 million barrels -- 17% below the five-year average for the time of year.
In the four trading days ending June 17, ANS gained $6.16 from a close of $73.68 on June 11 to $79.84 on June 17.
ANS closed at a five-dollar premium to WTI June 17, and at a $3.39 premium to Brent.
How high will crude go? The geopolitical crude premium is between $5 and $10 today, Kenneth Medlock, a Rice University professor told Barron's June 13. The premium "could easily step into the double-digits" in the event of a longer conflict, even if Israel hasn't hit Iranian oil infrastructure.
"It's not necessarily about the physical flow right now," Medlock said. "It's about the risk of flow tomorrow."
"We believe oil prices could quickly retreat if Iran's response remains limited but could surge beyond $100 per barrel if Iran moves to disrupt oil transit," according to CFRA analyst Stewart Glickman, Barron's reported. Financial firm Lazard thinks oil prices would surge above $120 if the Strait of Hormuz is blocked, and the U.S. would probably have to step in to unblock it.
Some shipowners are opting to steer clear of the strait, according to Bimco, a global shipowner's association, CNBC reported June 17. Ship owners are taking an extra degree of caution in the Red Sea and the strait.
Jakob Larsen, Bimco head of security, said the Israel-Iran conflict seems to be escalating, causing concerns in the shipowner community and a "modest drop" in ships sailing through the area.
Bimco -- which typically doesn't encourage vessels to stay away from certain areas -- said the situation has introduced an element of uncertainty.
2023 oil transit through the strait averaged 20.9 million barrels per day, some 20% of global petroleum liquids consumption, the EIA said.
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