In the short term we could see a knee-jerk reaction higher.
Our feeling is that with the current surplus of physical crude that prices will continue to erode from here for the next week or two.
So we could be looking at at least a month without Iraqi oil.
While gasoline was clearly the main driving force behind the market on Friday, there is little doubt that the Middle East tension also provides some upside momentum for crude.
[The DOE report] suggests that more product (such as heating oil) may be available in the week ahead, ... Adding to this, the U.S. 6-to-10 day forecast calls for above-normal temperatures in much of the U.S. northeast.
The U.S. will respond to this attack in some fashion and there remains a small fear that it may lose some Middle Eastern support as a result.
As far as the Middle East is concerned, there is still strong justification for a premium to remain in the market until it is clear the situation is much calmer on the ground.
I would imagine they'll use their 20-day price trigger as the barometer, which means not until the end of June, by when we should know what the UN is doing with smart sanctions.
The market has coped very well with the hurricane situation on the surface, particularly on the refinery side.
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