Oil prices are coiling as the market tries to determine whether a push by US Secretary of State, Anthony Blinken to convince Hamas to release hostages in return for a cease-fire will bear any fruit, states Phil Flynn of PRICE Futures Group.

Mr. Blinken says that Hamas needs to decide, and it needs to decide quickly, on what he says is a proposal that is extremely generous. Mr. Blinken is also warning Israel that they need to do more to get humanitarian aid into Gaza. While the market has seen some easing of risk premium as the threat of a confrontation between Israel and Iran has gone away, the ongoing drama in the continuing risk of supply against what should be record-breaking demand is going to keep the market well supported. There is a little bit of concern about Chinese demand that last month hit a 13-month low and talk that Iran is having a harder time moving their barrels of oil. Is it possible that Iran is having a harder time moving their barrels of oil because demand is slowing or is it possible that people are starting to find Iranian oil a little bit too hot to handle. This all comes against a backdrop of tightening global supply and more pressure by many in Congress to enforce sanctions on Iran, a novel idea as far as the Biden administration is concerned. Energy Tidbits reported that global oil in floating storage fell by 32.67 million barrels in the last two weeks to just 16.64 million barrels of oil.

The other concern for Biden is rising inflation and gasoline prices that according to Triple-A have eased a bit coming in at $3.659 which is a bit higher than yesterday but two cents lower than a week ago. That’s still 5 cents higher a gallon than a year ago. This comes as a CNN poll shows that 61% of Americans believe Biden’s presidency is a failure. The growing pressure on Biden to do something about gasoline prices could lead to another Strategic Petroleum Reserve release as the administration has already hinted, they may do just that. Yet that will be met with a lot of dissension from the Republicans who realized that the damage that the Biden administration has done by misusing the strategic reserve is going to cost taxpayers a lot of money over the long run. In the short run supplies in the US should tighten again this week. We are looking for a three-million-barrel drawdown in crude oil supplies and we’re looking for a two-million-barrel drop in distillate inventories and a one-million-barrel drop in gasoline inventories. We are also looking for refinery runs to uptick by 0.5%.

The risk of products going higher is still high. Tass, the Russian news agency, reported that the Slavyansk refinery in Russia’s Krasnodar Krai, which was attacked by Ukrainian drones on 27 April, has been forced to suspend some operations. “The plant’s operations have been partially suspended. Exactly 10 UAVs flew directly into the territory of the refinery, causing a severe fire. There may be some undetected damage,” said Eduard Trudnev, the security director of the company that operates the Sloviansk refinery, as quoted by Tass. It is not reported which operations have been suspended or whether the plant is operating at all.

Reuters also reported that, “The US military said on Sunday it had engaged five unmanned drones over the Red Sea that, “presented an imminent threat to US coalition and merchant vessels in the region. “US Central Command did not say in the statement if the drones were destroyed. Marine Log reported that “After a period with few reports of Houthi activity, the Iranian-backed group has resumed its targeting of merchant shipping, with Al Arabiya and other regional news outlets quoting the Houthi’s military spokesman as saying the group had attacked the “US ship Maersk Yorktown and an American destroyer in the Gulf of Aden and Israeli ship MSC Veracruz in the Indian Ocean.” According to US Central Command: “At 11:51 a.m. (Sanaa time) on April 24, a coalition vessel successfully engaged one anti-ship ballistic missile (ASBM) launched from Iranian-backed Houthi terrorist-controlled areas in Yemen over the Gulf of Aden. The ASBM was likely targeting the MV Maersk Yorktown, a US-flagged, owned, and operated vessel with 18 US and four Greek crew members. There were no injuries or damage reported by US, coalition, or commercial ships.” When you look at the preponderance of market action, it seems like the oil market as well as the petroleum products are coiling for a potential big move. We think the risk of an upside move is more likely.

Natural gas has some glut issues to deal with. EBW analytics reported that Freeport LNG’s false start raised demand-side concerns into early May to amplify the downturn. Although weakness appears likely to linger in the near term, however, dry gas production continuing to grind lower may offer notable upside potential into mid-summer. For the natural gas market, we’re looking for a 92 BC injection this week.

Learn more about Phil Flynn by visiting Price Futures Group.