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Oil Prices Hold Gains As Gasoline Stocks Hit 12 Year Lows, Cushing 'Tank Bottoms' Loom

Brent crude prices are rising back toward $100 per barrel this morning following the latest flare-up in fighting to threaten the U.S.-Iran ceasefire

Prices rose after the U.S. military said Iran fired missiles toward Kuwait and Bahrain, which failed to hit their targets.

The United States said it then struck an Iranian military ground control station on an island in the Strait of Hormuz.

 

API:

• Crude: -6.8MM

• Cushing: -279k

• Gasoline: +3.5M

• Distillate: -214k

DOE:

• Crude: -7.97mm - biggest draw since Feb

• Cushing: -583k

• Gasoline: +3.36mm - biggest build since Jan

• Distillate: +1.50mm

US crude stocks fell for the sixth straight week with Cushing inventories testing tank bottoms once again. The week saw an unexpected jump in product inventories with Gasoline's biggest build since January...

Source: Bloomberg

Today's rise in gasoline stocks lifts them off their lowest level for this time of year since 2014...

Source: Bloomberg

Cushing 'tank bottoms' are in sight once again...

Source: Bloomberg

The Strategic Petroleum Reserve saw another huge drawdown this week (down 58mm barrels since the start of the war)...

Source: Bloomberg

Rig counts are on the rise as US crude production drifts back towards record highs...

Source: Bloomberg

US crude and product exports jumped back towards record highs...

Source: Bloomberg

WTI was trading around $95 ahead of the official data...

Finally, economists at Macquarie wrote in a note this morning that crude oil’s muted reaction to the closure of Hormuz has mainly been a function of the oversupply seen before the war, .

The analysts suggested that “the market will be ok for another month or two, especially given commercial crude stocks have been cushioned by SPR/product draws."

However, if the Strait remains closed at the end of the northern summer (Labor Day is Sept. 7), physical availability will tighten materially.

“If the Strait reopens soon, we expect prices to fall sharply. However, with stocks drawing rapidly, if the Strait remains closed, at some point prices will need to move much higher.”

'Tank Bottoms' are in sight around the world.

Tyler Durden Wed, 06/03/2026 - 10:39

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"Next Month, Next Quarter, Next Year"

By Molly Schwartz, cross-asset macro strategist at Rabobank

In a tense Congressional Hearing before the foreign relations committee, Marco Rubio defended the Trump Administration’s war in Iran, praising the success of US military operations destroying Iranian military and nuclear facilities. He also said that a deal with Iran could happen “today, tomorrow, or next week.” However, the recent military escalations between the US and Iran, the refusal of Israel and Hezbollah to cooperate, and reports of Pezeshkian’s resignation — leaving Iran in the hands of the IRGC — mean that a deal seems to lie more on the horizon of next month, next quarter, or maybe even next year.

Our base case that we see passage through the Strait disrupted for at least three more months still stands as we have yet to see any tangible headlines to suggest an accelerated timeline. The negotiations currently lie in Iran’s hands, as Bloomberg reports Iran’s Mehr news saying that “officials in Tehran are discussing their ‘final text’ to send to the US.” One might be hesitant to truly deem this text as “final” (if it even exists), as it may be more of a “final_v3.doc”, or a “final_FINAL_v6.doc”, or even a “final_FINAL_totallyforrealthistime.doc”.

The most promising resolution right now is that the IRGC remains in power, but enriched uranium is handed over to an executor, like China, though we have yet to see any confirmed updates that this is a feasible solution that Iran would actually agree to at this juncture. The extended 60-day ceasefire is still ongoing, while both the US and Iran are dedicated to keeping the Strait closed and exchanging fire. CENTCOM posted on X today to show off the USS Abraham Lincoln enforcing the US blockade, which has apparently redirected 122 vessels to “ensure compliance.”

Yesterday, Trump slammed Vulcan’s Hammer on the AI industry, signing an executive order, “Promoting Advanced Artificial Intelligence Innovation and Security.” The executive order lauds how the administration has “unleashed tremendous technological growth and economic investment in AI by slashing the bureaucratic constraints that the prior administration placed on America’s AI developers and researchers, and by instead encouraging AI innovation and accelerating responsible AI adoption across government and industry.”

Part of the executive order is intended to support the AI industry, seeking to utilize AI in federal cybersecurity programs, and utilize AI models (potentially Mythos?) to pinpoint vulnerabilities. However, the order also seeks to impose new restrictions, likely in response to the emergency meeting triggered by Mythos a few months ago. This includes lots of classified processes and frameworks to make sure that an evil AI model, the likes of that in a Philip K. Dick novel, doesn’t usurp the American government as the presiding force leading the world’s global hegemon (or more likely, making sure these models can’t be used to hack into sensitive government websites). The process is referred to as a “voluntary framework” so that AI developers can submit their new models to the government 30 days before release to the public. Though the order also clarifies that “nothing in this section shall be construed to authorize the creation of a mandatory governmental licensing, preclearance, or permitting requirement for the development, publication, release, or distribution of new AI models, including frontier models.”

While innovation in the US is so hot that the government is now pulling in the reins a bit, officials in Canada are turning a blind eye to sluggish growth. Last week it was announced that Canadian GDP shrunk by 0.1% in Q1 of 2026, marking the second consecutive quarter of contraction and signalling a technical recession. Worse yet, the Q1 GDP estimate missed expectations of seeing growth at 1.5%, suggesting that the health of the Canadian economy has been overestimated by economists for the past few months.

Prime Minister Carney partially attributed the contraction to “uneven data” as the Canadian government “has been in the process of laying the foundations for a stronger, more resilient, more independent Canadian economy.” But at the same time, this comes less than a week after Carney celebrated close US-Canadian economic ties when speaking to the Economic Club of New York, saying that “Canada Strong will help make America great again.”

Bank of Canada Deputy Governor, Carolyn Rogers, has also brushed off the technical recession, saying that we need to “look past technical recession indicators” in favor of more leading economic indicators. But for some, the technical recession is a flashing red light, screaming that the current trade situation with the US is unsustainable and it’s time to sit down at the negotiating table.

Canadian trade minister LeBlanc sat with USTR representative Greer yesterday in Washington to discuss the USMCA. Prior to their sitdown, LeBlanc sent a letter to both Greer, and Mexico’s economy secretary Ebrard, asking to see the USMCA renewed for another sixteen years, as the USMCA review is currently underway. While the likelihood of the USMCA being renewed in its current form is slim to none—which LeBlanc is likely painfully aware of—he highlighted that conversations pertaining to the sectoral tariffs (Section 232 hitting steel, aluminum, automobiles, etc.) will be “essential.”

Tyler Durden Wed, 06/03/2026 - 10:20

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US Services Surveys Signal Surging Prices, Mixed Growth

Following the dramatically better than expected rise in US Manufacturing PMI surveys, analysts expected stability in the Services side of the economy in May.

They were somewhat correct but the message was mixed with one survey improving while the other deteriorated...

• S&P Global US Services PMI dropped from 51.0 (April) to 50.9 (flash May) to 50.7 (final May) - dropping back towards March lows.

• ISM US Services PMI rose from 53.6 to 54.5 (better than 53.8 exp)

Source: Bloomberg

Under the hood, both surveys signaled rising prices with employment weaker and a mixed picture for orders (ISM higher, S&P lower)...

Source: Bloomberg

"While the US manufacturing economy is reporting a surge in demand as war-related supply and price worries drive precautionary stock building, it’s a different story in the service sector," says Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.

"Demand for services has been largely stalled over the past three months, losing the strength seen earlier in the year."

The sluggish services economy is acting as drag on overall economic growth, which the PMI data signal to be running at a modest annualized pace of just above 1% so far in the second quarter...

Williamson notes that consumer-facing service sectors were the hardest hit, where orders are now falling at the steepest pace since the pandemic in 2020, with respondents blaming the decline on a combination of squeezed spending power from energy prices hikes and customers pushing back on higher prices being charged for services.

However, business services are also seeing reduced order book growth compared to earlier in the year and financial services firms are coming under pressure from higher interest rates.

"Rising costs and cooling demand are meanwhile causing service companies to cut staff at the fastest rate seen since the early months of the pandemic," warns Williamson.

This is not a good sign for CPI...

The increase in input cost inflation being signaled by the PMI points to a further rise in consumer price inflation in the coming months, but, Williamson notes that, on the other hand the "weakening of demand growth and downturn in the labor market being indicated could help allay concerns over any inflation spike becoming more entrenched."

Respondents are almost universally worried about energy costs...

But tariff fears are gone?

credittrader Wed, 06/03/2026 - 10:07

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