Stay Informed with Tom Seng's Oil & Gas Commentary

Guardian Mineral Management presents the ‘Weekly Oil & Gas Commentary’ series, offering timely updates and expert analysis on the ever-evolving oil and gas markets. Led by industry veteran Tom Seng, this series provides valuable insights that help mineral owners make informed decisions. Stay ahead of market trends with our in-depth commentary and understand the implications for your mineral assets.

Oil – Fundamental Analysis

Crude prices have stair-stepped higher this week as tanker shipments through the Strait of Hormuz slow once again and as Iran continues to indicate it will permanently operate the key bottleneck. Proposed new economic sanctions on Iran by the US have heightened tensions as well. Another large increase in commercial oil inventories was overshadowed by continuing drawdowns in the SPR and increased refinery utilization. WTI’s High was Wednesday’s $87.70/bl. for September while the Low was Monday’s $80.80. October Brent crude hit its High on Thursday at $94.70/bl. with the low on Monday at $88.00. Both grades settled higher on the week. WTI is about ($7.00) down over the last (3) weeks. The WTI/Brent spread has now widened to ($7.10). September’s WTI futures contract expired on Thursday bringing October to the forefront on Friday.

President Trump announced a switch in the approach with Iran from one based upon military action to sweeping economic sanctions which would also include those conducting business with Iran. China is currently the No. 1 importer of Iranian crude. Traders view the economic sanctions as only firming Iran’s resolve, leading to further restrictions on Hormuz passage and additional attacks on its neighbors. The seemingly unending market optimism regarding a resolution of this conflict appears to be diminishing as prices look to stay higher for longer. The US/Iran 60-day MOU signed on 06/17/26 expired this week without any agreed upon settlement.

 Iran has continued talks with Oman about the joint operation of the Strait of Hormuz leading to a threat by Trump to bomb the latter should it proceed with the arrangement. And despite Trump’s claim that the US is in “total control” of the Strait, only one or two tankers per day are getting through with an estimated 2.0 million bld., down from July’s 4.0 million bld. Meanwhile, Iraq seeks to increase its output from the current 2.9 million bld. but will need both OPEC approval and new routes to deliver its shipments. The country claims it can reach 8-10 million bld. within the next (6) years. Additionally,  Venezuela’s production has climbed to 1.25 million bld. with US refiners receiving about 500k bld.

 The Energy Information Administration’s Weekly Petroleum Status Report indicated that commercial crude oil inventories for last week increased +4.4 million bl. to 429 million and right at the 5-year average. The API had forecasted a -0.330 million bl. draw while analysts expected a -1.6 million change. Total motor gasoline inventories increased by +690k bl. to 209.8 million bl. and are -5% below the 5-year average. Distillates decreased -1.5 million bl. to 105.6 million bl. and -13% below the 5-year average. Refinery utilization last week was 97.2%  vs. 96.2% the week before representing an increase of +215kk bld. to 17.4 million bld. Gasoline demand was 8.7 million bld. vs. 8.96 million bld. the prior week.  Crude imports were 6.6 million bld. vs. 7.3 million bld. the week before. Exports of crude were 4.1 million bld. vs. the prior week’s 3.1 million bld. Exports of refined products were 8.3 million bld. vs. 8.7 million bld. The SPR was -5.3 million bl. to 293 million bl. (the lowest level since 1983). Stocks at Cushing, OK were -1.3 million bl. to 21.3 million bl. or 29% of capacity. Production last week was 13.8 million bld. vs. 13.8 million bld. the prior week and 13.4 last year. The US oil & gas rig count was -5 last week at 588 vs. 538 last year with -3 in oil, +1 in natural gas and -1 misc.

 Gasoline prices are now $4.11/gal., +$0.03/gal. from last week, +$0.09/gal. from last month and +$0.97/gal. from last year. Prices have never been this high this late in the year before now. The EPA is allowing refineries to sell E10, the winter blend, earlier than normal. The oxygenators, such as ethanol, could reduce the cost per gallon depending on oil prices. Meanwhile, diesel “crack” spreads broke the $100/bl. mark this week, an all-time high as refining capacity worldwide remains constricted.

 Rising oil prices and Treasury yields, coupled with a disappointing retail outlook from Wal-Mart, weighed heavy on stocks this week. New claims for unemployment benefits for last week were 206k, lower than a forecasted 212k. However, continuing claims rose +18k to 1.8 million. After dipping lower Thursday, the (3) major US stock indexes rose Friday but still settled lower week-on-week. The USD is being devalued after the US Treasury bought Japanese yen to help prop it up. A lower USD is supportive of crude prices. Gold was higher this week as a beneficiary of the lower USD.  

Looking Ahead

Only time will tell if the new economic sanctions on Iran will persuade them to re-open the Strait of Hormuz and return to the negotiating table. The US Naval blockade in the region has successfully stifled shipments of Iranian crude while Iran is running out of storage capacity. Traders will be watching for any definitive arrangement between Iran and Oman to administer the Strait and, if completed, the reaction by the Trump Administration. Given the worldwide shortage of refined products, look for US refineries to run at higher utilization rates past Labor Day Weekend. In terms of producing winter blends earlier than normal, refineries have to undergo a “turnaround” period to adjust which would take a considerable amount of capacity offline during that time.

 Natural Gas – Fundamental Analysis

September NYMEX Henry Hub Natural Gas futures are only slightly higher this week even with increased power generation due to hotter weather as production increased again. A smaller-than-forecasted storage injection spiked prices Wednesday but they would fall back by week’s end. The week’s High was Wednesday’s $2.87.5/MMBtu while the Low was Monday’s $2.64. The Henry Hub contract still remains in a 6-week downtrend. Natural gas demand this week has been estimated at about 115 Bcfd with power consumption increasing +2.4 Bcfd while supply was thought to be 116-117 Bcfd. LNG exports were 17.0 Bcf while exports to Mexico were higher at 9-10 Bcfd. A heat wave continues across the EU and UK with wildfires in several areas.  In the UK, natural gas prices at the NBP were most recently higher at $22.30/MMBtu. Dutch TTF futures were also higher at $22.40/MMBtu.  Asia’s “JKM” was quoted at $22.60/MMBtu as Asian and European markets are essentially competing for the same shipments. (The US has become the largest supplier of LNG to Japan.) The EIA’s Weekly Natural Gas Storage Report indicated an injection of +16 Bcf vs. a forecast of +36 and a 5-year average of +29 Bcf.  Total gas in storage is now 3.169 Tcf, now at -0.9% below last year and 6.2% above the 5-year average.

Looking Ahead

The 8–14-day forecast looks favorable for natural gas-fired generation for most of the US as record high temperatures continue in the Southern tier states. While global LNG prices are strong, the US is currently exporting at maximum output. Look for supply surpluses to continue which will continue to increase storage injections. The EIA is currently projecting a 4.0 Tcf level before winter.