Strait Opening - The Energy Report

Oil prices are easing back after a tumultuous day as ships are starting to make their way through the Strait of Hormuz. This follows the launch of Project Freedom, the U.S. military operation to restore freedom of navigation for commercial shipping. President Trump announced the effort, stating the U.S. would “guide” stranded vessels out of the Gulf, supported by guided-missile destroyers, over 100 aircraft, unmanned platforms, and 15,000 service members.

Iranian forces for their point, lashed out wildly and raised concerns that in Iran the right hand may not know what the left had is doing. Reports emerged of missiles striking a U.S. military ship, which the U.S. later denied. Trump warned Iran in strong terms: if they attacked U.S. vessels in the operation, they would be “blown off the face of the earth.” Overnight, Iran may have got the message because it was relatively quiet.

Still yesterday, Iran launched strikes on a UAE oil facility (including the Habshan-Fujairah pipeline area, sparking anger in the UAE) and hit a South Korean cargo ship, the HMM Namu, which suffered an explosion and fire, though the crew was reported safe. Trump responded by inviting South Korea to join the mission against Iran.

Oil markets showed volatility but ultimately eased on hopes of improving tanker flows, though prices remain elevated above $100/barrel amid ongoing risks. Brent crude futures settled around $107–108 per barrel, slipping modestly (down ~0.1–0.6%) as initial reports of ships moving emerged. WTI crude traded near $101–105, also pulling back slightly.

RBOB gasoline futures (June 2026 contract) eased to around $3.59–$3.71 per gallon, down 0.2–0.8% intraday, reflecting tempered supply disruption fears despite the geopolitical backdrop. Ultra-low sulfur diesel (ULSD) futures followed a similar path, with NY Harbor and Gulf Coast prices around $3.94–$4.02 per gallon, declining 0.5–1% as refined product margins softened on the broader crude pullback.

Overall, while Project Freedom has injected some optimism into tanker transit, the lack of a full U.S.-Iran peace deal and recent attacks keep energy markets on edge with elevated risk premiums. But Iraq is offerings a way that some brave souls can make some money on it!

It’s the Strait Discount! Get it now while you can! Bloomberg reports that Iraq is offering its term buyers huge discounts for crude loaded this month! But the catch is that  tankers will have to transit the Strait of Hormuz to collect the barrels deep inside the Persian Gulf. Still its sounds enticing as the OPEC producer is offering discounts on official prices of as much as $33.40 a barrel for its flagship Basrah Medium crude, according to a notice from state oil marketer SOMO seen by Bloomberg News. Now all you do is have to stay close to the US military presence and you should be ok.

Gas prices rose again last night but not as sharply as the big leap seen over the weekend. Prices could ease this week if we get more tanker movement reports through the Strait of Hormuz today. According to the latest AAA data, the national average for regular unleaded gasoline now sits at $4.483, up 2.6 cents from yesterday’s $4.457. Mid-grade is averaging $4.967 (up 3.1 cents), premium is $5.341 (up 3.0 cents), and diesel climbed to $5.659 (up 1.8 cents). E85 is now at $3.627, up about 11 cents from yesterday. Compared to a week ago, regular gasoline is 30.7 cents higher, while diesel has gained nearly 20 cents. Year-over-year, regular is up a steep $1.318 per gallon from last May’s $3.165 average.

Nevertheless, Iran’s Parliament Speaker Mohammad Bagher Qalibaf today is  saying that the present situation in the Strait of Hormuz is “unsustainable” for the United States.

So I guess that means that Iran will wait out the US to start attacking ships and oil tankers because the US can’t stay there forever. Qalibaf claims that a “new dynamic” is taking shape in the Hormuz Strait.  And he also claims “Iran positioning itself as the primary ‘guardian of regional stability’ is like the rooster declaring himself in charge of the hen house designed to impress the home crowd, but rarely delivering when the pressure is on. Iran keeps brandishing the “Strait of Hormuz” card like it’s a royal flush, even as its economy and proxy networks absorb fresh hits every time tensions escalate.

Yet reality just delivered a quiet rebuttal. The Alliance Fairfax, a U.S.-flagged vehicle carrier operated by Farrell Lines (a Maersk subsidiary) and part of the U.S. Maritime Security Program, had been stranded in the Gulf since early March 2026. On Tuesday, the ship successfully completed its transit, escorted by U.S. Navy guided-missile destroyers under CENTCOM’s “Project Freedom” initiative aimed at restoring commercial shipping and assisting stranded vessels. The passage went off without incident. No harassment, no interference, all crew safe and unharmed.

So is this the start of a genuine “new dynamic” in the Gulf, or simply another round of Iranian brinkmanship theater? Time—and perhaps a few more assertive moves from the U.S.—will tell. For now, the safe arrival of the Alliance Fairfax stands as a practical reminder that proclamations from Tehran often prove far louder than the results they produce.

The Bottom line is that if the strait opening continues to show progress, we may have seen the top in oil. If not get ready for more turmoil. Call Phil Flynn 888-264-5665 if you want to get involved.

Natural gas prices are lower overnight as the June contract trades around $2.83/MMBtu, down roughly 1.2-1.3% in early action after Monday’s sharp rally to a four-week high. The market is taking a breather after recent gains driven by softer production numbers and solid LNG flows, but mild shoulder-season weather and healthy storage injections are capping upside for now. Cash prices showed some mixed action with modest gains in certain hubs on weather-related demand bumps into midweek, while overall sentiment remains cautious amid abundant supply. Production has been trending lower recently, with some reports noting output dipping toward an 11-week low around the 108 Bcf/d area due to maintenance and earlier weather impacts. That’s providing a bit of a floor, along with LNG exports holding near strong levels (though slightly off April’s records). On the storage side, recent EIA data showed builds that were a touch lighter than expected in some weeks, narrowing the surplus modestly from prior highs, but inventories remain comfortably above average heading into the injection season. Technical picture shows prices consolidating after the recent pop, with support around the $2.70-$2.80 zone and resistance near recent highs. Bulls will need cooler-than-normal forecasts or stronger export/LNG data to push higher, while bears eye any return to aggressive injections and warmer trends.

Looking ahead, the market continues to balance ample domestic supply against growing long-term demand drivers like LNG exports and power sector needs (including AI/data center growth). Geopolitical factors and global LNG tightness provide some tailwinds, but near-term U.S. fundamentals lean bearish without a significant weather shift.

Fox Weather is warning that a massive cold front is bringing a triple threat: severe storms to the Central U.S., washouts in the Northeast, and snow to the High Plains. Late-season snow is possible in the Rockies, while record May heat could hit the Pacific Northwest in spots.

Cooler air plunging into the Midwest and Northern Plains could boost heating demand in the near term and support some power needs, while any severe weather disruptions might add volatility. Overall, the pattern suggests variable demand swings that could keep nat gas traders on their toes this week. Stay tuned for updates as models evolve.