Oil up 12% since Friday as Trump reinstates Hormuz blockade and adds 20% transit fee
Crude is 12% higher than it was Friday. President Trump announced he is reinstating the blockade on Iranian shipping through the Strait of Hormuz and imposing a 20% transit fee on other cargoes moving through it, and both Brent and WTI ran about 2% higher again in Asian trade Tuesday, with Brent at a one-month high. If you sell fuel for a living, that is your week: replacement cost is climbing faster than your street price, and the 20% fee is a new line item on every barrel that comes through the strait.
The trigger was July 7, when Iranian attacks on three commercial vessels in the strait drew immediate US military strikes on targets inside Iran. The blockade followed. Whether it holds is a fair question. Iran is estimated to have moved supertankers carrying 12 million barrels of crude out between July 7 and July 14, in the same week the US announced the renewed blockade, and Iranian officials claim exports have topped 80 million barrels in under a month.
For jobbers, the mechanics are simple enough. Wholesale moves off crude with a lag of days, not weeks. Contract customers on rack-plus deals will see it first. Anyone still quoting a fixed price into August should look hard at those numbers today.
China's demand hole
The demand side is doing something strange, and it cuts the other way. China's June crude imports fell 41.3% from a year earlier to 29.27 million tons, or 7.12 million bpd, a decade low, according to Chinese customs data released Tuesday. Refiners there balked at paying up. At least two Chinese refiners have not nominated any Saudi term cargoes for August, and others were not allocated provisional supply.
Those are barrels China is no longer bidding for, which is holding the price run down. If Beijing decides to restock, that support goes away.
Ukraine's refinery campaign
Ukraine hit two Russian refineries overnight July 14, per its General Staff: the Gazprom Neftekhim Salavat complex in Bashkortostan, roughly 870 miles out, and the Afipsky refinery in Krasnodar. Fires were reported at both. Salavat was described as the last major Russian gasoline producer not already struck this year.
None of that lands directly in a US rack. It matters because Russian product that would otherwise reach world markets is being taken out barrel by barrel, and diesel is a global commodity. Tight barrels anywhere show up in your Gulf Coast diff eventually.
The June CPI number
June CPI, out this week, is expected to show inflation cooled partly because gasoline prices fell. Read that for what it is: history. Pump prices are already ticking back up nationally, and the June print says nothing about what July looks like after a 12% crude move.
Propane and the Jones Act
Quiet but useful: RBN reports the emergency Jones Act waiver issued in March moved almost nothing. MARAD voyage reports show three propane cargoes under the waiver, about 540 Mbbl total. Anyone who built a winter propane plan around waiver relief should assume the waiver is not the answer.
What to watch
Whether the 20% transit fee actually gets collected, and on whose cargoes. Whether Chinese buying stays absent through August term nominations. And whether Ukraine's drones keep reaching as deep as the roughly 870 miles they covered to hit Salavat, because at that range most of Russia's refining is within reach and more product can come off the market. If the strait stays passable and China stays out, crude could ease back off these highs.