WTI crude tops $91 as Iran-Israel strikes rattle oil markets

WTI crude climbed to $91.30 a barrel Monday, the highest close in months, as Iran and Israel exchanged fire for the first time since an April ceasefire, threatening supply routes through the Strait of Hormuz.

"The market is pricing in a prolonged disruption to Persian Gulf flows, and until the Strait of Hormuz reopens, every barrel that moves through the chokepoint carries a war premium," said Omar Tariq, senior commodities analyst at Edgen.

Brent crude rose 1.6 percent to $94.74 a barrel after earlier surging more than 4.5 percent. Both benchmarks have gained more than 60 percent this year but remain below March levels, when Brent traded around $120. Saudi Arabia cut its July official selling price for Arab Light crude to Asia to a $9.50-a-barrel premium over the Oman/Dubai benchmark, down from $15.50 in June, signaling slowing demand even as supply remains constrained.

The Strait of Hormuz remains restricted after Iran's initial blockade, with Qatar's Ras Laffan export capacity still running roughly 17 percent below normal. President Trump urged both sides to stop "shooting" and indicated ceasefire talks were proceeding, but said the blockade would remain until a "Final Deal" is reached. Any prolonged closure would tighten global crude supplies further and keep upward pressure on fuel costs for consumers and airlines.

Supply Disruption Premiums Widen

NYMEX July gasoline futures closed at $3.0706 a gallon and July heating oil at $3.5999, reflecting the broader upward pressure across the petroleum complex. Canada announced up to C$150 million in financing to help airlines cope with higher jet fuel costs, the latest government intervention to soften the blow from elevated energy prices.

OPEC+ could begin unwinding the 2 million barrels per day of official cuts agreed to in October 2022 once the Strait of Hormuz reopens and flows normalize, according to Rystad Energy. In the near term, excess supply could be absorbed through rebuilding strategic and commercial inventories, but a structural surplus may re-emerge once restocking is complete, potentially forcing the group back into coordinated production cuts.

Natural Gas Under Pressure

NYMEX July natural gas settled at $3.1470 per million British thermal units, down 2.8 percent, as milder weather forecasts and rising production offset bullish storage data. U.S. inventories remain 5.7 percent above the five-year seasonal average, while Lower-48 dry gas production hit 110.4 billion cubic feet per day, near record levels.

LNG export flows averaged 17.2 bcf per day, down 5.8 percent from the prior week, as seasonal maintenance at terminal facilities pulled export demand lower and left more gas available for the domestic market. European storage is 41 percent full against a five-year average of 56 percent, a gap that will require significant U.S. LNG imports once maintenance cycles end.

The Energy Information Administration reported a 95 bcf injection for the week ending May 29, below the 99 bcf consensus estimate and the 101 bcf five-year average. Despite three consecutive weeks of lighter-than-average builds, prices failed to hold gains, with the July contract unable to break through the $3.387 to $3.396 resistance zone for a second session.

This article is for informational purposes only and does not constitute investment advice.