DTN Oil Update
ULSD Futures Reach 12-Month High on Tight Supply Outlook
HOUSTON (DTN) -- Oil futures settled Monday's session mixed with the ULSD contract closing at a fresh 12-month high while RBOB futures slid to a two-week low amid stricter sanctions on Russian crude oil trade recently imposed by the European Union.
August ULSD futures settled $0.0467 higher to $2.4997, driven by expectations of limited global supplies due to the sanctions on Russian crude exports to the EU, coupled with firm demand fundamentals. In contrast, the August RBOB futures contract decreased by $0.0237 to $2.1297 gallon amid plentiful supply.
Upstream, the crude oil benchmarks were little changed. The front-month NYMEX WTI futures contract dropped by $0.28 to $67.06 barrel (bbl), while the September ICE Brent futures contract fell by $0.22 to $69.06 bbl.
The U.S. dollar weakened by 0.613 points to 98.235 against a basket of foreign currencies
On Friday, July 18, the EU prohibited the import of seaborne crude oil and refined petroleum products from Russia and imposed a price cap of $47.60 bbl. With this measure, the EU expects to impact around half of Russia's total oil exports to the bloc.
"The 18th sanctions package also introduced an automatic and dynamic mechanism for future reviews of the Oil Price Cap. The new system will ensure that the cap is always 15% lower than the average market price for Urals crude in the previous period of six months, resulting in both predictability for operators and downward pressure on Russian energy revenues," the EU stated.
This announcement put upward pressure on the front-month ULSD futures contract, amid expectations of tight global supplies due to the sanctions.
However, the bearish tone emerged in the oil futures market Monday morning following media reports citing comments from Commerce Secretary Howard Lutnick over the weekend. Lutnick stated that Aug. 1 is a "hard deadline" for countries to begin paying tariffs to the United States. Trading partners, including EU and Mexico, have been threatened with a 30% trade tariff starting on the first day of August.
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