Oil prices jump 4% as U.S. strikes on Iran reopen Hormuz fears; Brent tops $79
Brent crude rose 4% in Asian trade Monday to top $79 a barrel, the highest in more than three weeks, after a weekend of U.S. strikes on Iran, Iranian claims that the Strait of Hormuz is closed to traffic again, and Iranian strikes on five U.S. allies in the region. WTI gained 4.13% to $74.36. If you buy at the rack, that is your week.
A 4% pop in the benchmark does not stay in the futures pit. It works into wholesale gasoline and diesel quickly, and jobbers holding contract volumes at a fixed margin over rack absorb the timing gap between what they pay Tuesday morning and what their dealers pay Tuesday afternoon. Watch your credit lines. A crude move of this size on a supply scare eats working capital before it does anything to your margin, and it hits hardest for anyone carrying big diesel inventory into a market that could just as easily give the whole move back if the strait stays open.
That last part matters. The market has priced Hormuz closure headlines before and unwound them inside a week. OilPrice.com notes traders fear this flare-up may not subside as easily as previous ones. Where it goes from here is not settled. Position accordingly, and do not build a fourth-quarter supply plan on a Monday print.
Terminal money
Singapore-based Global Group is putting US$10 million into an oil terminal in Timor-Leste, per The Business Times. It has no bearing on your rack prices. It is worth a line only as a reminder that independent distributors are still funding physical storage in thin markets, which is the same bet a U.S. jobber makes when he buys a second terminal position instead of leaning on a single supplier. Storage is optionality. In a week where crude moved 4% on a headline, that is not a small thing to own.
Adulteration arrests
Indian police arrested four people in Lucknow in a fuel adulteration and black marketing case under what they are calling Operation Ethanol Shield, according to ANI News. Nothing about it moves U.S. supply. It does land in an industry that runs on product integrity, and any U.S. marketer who has ever had a load come up short on spec knows what a single bad tank does to a dealer relationship.
Ethanol feedstock
India's ICAR and IIMR developed a sugarcane-maize intercropping model to support ethanol supply, ChiniMandi reports. India's blending program is India's problem, but its corn demand is not. More Indian domestic maize going to ethanol could shift global corn trade at the margin, and U.S. corn is what sets your ethanol cost.
What to watch
Whether Hormuz traffic actually stops or the closure claim stays rhetorical. Whether Brent holds above $79 or gives it back. Diesel cracks are the tell.