Written Commentary
Ag Market View for July 8.25
July 8, 2025
CRUDE OIL
August Crude oil opened sharply higher overnight in the wake of the US bombing of Iranian nuclear sites over the weekend but sold off immediately and was back inside Friday’s range by Midnight. The market is awaiting Iran’s reaction, specifically whether they will attempt to block the Strait of Hormuz, through which some 20% of the world oil traverses, but this would be considered to be a desperate move. Iran ships its oil through the Strait, so cutting off the supply would affect their ability to generate income, and it would also risk irritating their main trading partners in China. The global oil market has spare capacity, with OPEC+ reported having around 5.7 million barrels per day in excess capacity, with Saudi Arabia and the United Arab Emirates having about 4.2 million bpd extra, but most of that is shipped through the Strait. This is some ability to move oil via pipeline but in a limited capacity. Even the threat of a blockage is already having an effect on shipping, as there are reports that at least two supertankers have turned around at the Strait following the US strikes over the weekend. The Baker Hughes rig count showed US oil rigs in operation were down 1 rig to 438 last week. This is down from 485 a year ago and the lowest since September 2021.
NATURAL GAS
August Natural Gas is lower this morning after reaching its highest level since April 7 on Friday. Unlike crude oil, natural gas prices have not seen a rally off the US military strikes against Iran over the weekend, even though a significant portion of LNG supply travels through the Strait of Hormuz. Extreme heat in the US is currently boosting cooling demand, and the 6-10 and 8-14 day forecasts show above normal temperatures across most of the lower 48 states. Last week’s EIA report showed a net injection of 95 bcf into US supply for the week ending June 13, which was below the average expectation of +98 but still above the five year average for the week at +68. Storage was down 8.0% from a year ago but had climbed to 5.6% above the five-year average. The hot weather could finally start to slow the buildup in supply. The Baker Hughes rig count showed US natural gas rigs in operation were down 2 rigs last week 111.
PRODUCTS
Gasoline and diesel prices opened sharply higher overnight in the wake of the US military strikes in Iran, but like crude oil, they eventually moved back inside Friday’s range as the market was waiting to see what would happen next, specifically whether Iran would attempt to block or mine the Strait of Hormuz. Last week the analytics firm Kpler pointed out that the Middle East represented 17% of global diesel seaborne imports in 2024, mostly from Kuwait and the United Arab Emirates (via the Persian Gulf) and Saudi Arabia (via the Persian Gulf and Red Sea). Nearby RBOB (gasoline) reached its highest level since August.
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