Crude drops over 5% as US-Iran fighting pauses, but pump prices keep climbing 15 cents
Crude fell hard Monday. WTI dropped 5.39% to $84.47 and Brent slid 5.15% to $91.80 after Washington paused its bombing campaign against Iran over the weekend and Tehran signaled it would hold off on retaliation. Brent had been above $100 during the two weeks of fighting. For anyone buying at the rack this week, the timing is cold comfort. The national pump average is still rising.
AAA put the national average at $4.09 for regular, up 15 cents from last week, with most states now at $4 or higher. Pump prices lag crude by a couple of weeks, so the wartime premium is still working its way through wholesale and into your street price even as the futures screen turns green.
The pump lag
Right now jobbers are stuck with the gap between what crude is doing today and what your customers pay. San Antonio went up 12.6 cents in a week to $3.67, nearly 58 cents above a month ago. Peoria added 8.5 cents to $4.22. Chattanooga is at $3.63, up 10.7 cents. Demand held up through it: EIA had gasoline demand rising from 8.84 to 8.94 million barrels a day last week, with total supply up slightly to 211.3 million barrels.
If crude keeps easing and the strait stays open, rack could soften over the next two to three weeks. One survey from PYMNTS found 17% of hourly workers have missed shifts because of pump prices, so demand may not stay this firm if $4 holds into August.
USDA's 45Z rule
USDA unveiled its 45Z carbon intensity rule, which opens a path for carbon capture to count toward ethanol's CI score. For blenders and anyone selling E15 or moving ethanol gallons, a lower measured CI on corn ethanol could reshape which plants qualify for the clean fuel credit and how the economics pencil out downstream. It is early, and the scoring details will matter more than the announcement. Worth watching how quickly plants with CCS lines move to certify.
Refinery upsets
Lightning triggered an upset at Phillips 66's Sweeny refinery, one of the larger Gulf Coast plants, which could tighten regional supply if the disruption runs more than a few days. No word yet on the scale of the outage.
Overseas, Ukrainian drone strikes sparked a fire at Russia's Tyumen refinery and hit several other refining and airfield targets over the past week. That does not move a US rack directly, but it keeps a bid under global product markets and feeds the same crude story that drove your last two weeks of increases. Russia's own domestic fuel crunch is now bad enough that NBC reported ordinary Russians confronting shortages.
What to watch
Whether the US-Iran pause holds is the swing factor. If diplomacy sticks and OPEC output stays steady, crude could keep drifting lower and rack should follow with the usual lag. If the strikes resume, Monday's drop reverses fast.
Watch Sweeny for how long it stays down and how far the Gulf Coast basis moves. Watch the EIA weekly for whether $4-plus finally dents demand. And watch USDA for the 45Z scoring tables, which will tell ethanol marketers what the credit is actually worth.