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First Look - Oil tumbles $4.50 after Israel's limited response to Iran | Gas plunges amid mild weather outlook and rising production

Oil market risk premium evaporates as Israeli strikes on Iran avoided crude, nuclear, and civilian infrastructure

Both Brent and WTI fell over 6% in Monday morning trading
Skew for crude oil options also showed a major reduction in geopolitical risk premium

WTI traded near $67/Bbl Monday morning as Isreal showed a more measured approach to retaliatory strikes against Iran

The target strikes on mostly military infrastructure were in line with a request from the Biden administration (BBG)
Iran’s state media said that the country's oil facilities were operating normally
“We may see further short-term downward pressure as the geopolitical premium is priced out,” said Arne Lohmann Rasmussen via Bloomberg, chief analyst at A/S Global Risk Management

“However, we see strong support around $70 and, with last night’s price drop, most of the geopolitical premium is likely already priced out.”

The December WTI contract showed a sharp shift into put-skew vs the large amount of call-skew observed on Friday
The shift was less about puts getting more expensive but a reflection of call values getting relatively much cheaper
AEGIS notes that a change to put-skew can make costless collars less attractive to producers depending on how far down the curve the skew changed

Gas futures tumble driven by mild weather outlook, and higher production
- Prompt gas was 18.9c lower to $2.371/MMBtu (As of 7:52 AM)
- Winter ‘24/’25 strip is down 16.1c to $2.848, and the Summer ’25 strip is down 8.4c to $3.038
- Lower 48 production averaged 102.8 Bcf/d over the weekend, nearing the summer high of 103 Bcf/d, up roughly 2 Bcf/d from autumn lows (Woodmac)
- Lower 48 temps warmed significantly over the weekend, with East of the Rockies warmer and West cooler, while recent 11-15 day cold trends in forecasts were largely removed, indicating above or near-normal temps for the next two weeks.(Criterion)
US FERC grants Golden Pass LNG three-year extension to complete export project (S&P Global)
- FERC granted Golden Pass LNG an extension until Nov 30, 2029, to finish construction on the Texas LNG export project, following delays due to the bankruptcy of lead contractor Zachry Group
- The project remains on track to start LNG production by late 2025; however, Golden Pass seeks an additional 18 months from the DOE to meet its export deadline, pushing potential commercial exports to as late as March 2027
- Owned by QatarEnergy (70%) and ExxonMobil (30%), the project aims for an annual export capacity of up to 18.1 mmty
- Despite setbacks, Golden Pass has reached roughly 80% completion and has shifted to new contractors McDermott’s CB&I and Chiyoda following Zachry’s exit