DTN Oil Update

Karim Bastati
DTN Analyst

VIENNA (DTN) -- Oil futures tumbled Thursday morning on U.S. President Donald Trump's apparent wind down of threats to launch imminent strikes on Iran. An expansion of U.S. crude stocks, alongside an outsized build in gasoline inventories, added to bearish pressure.

NYMEX WTI for February delivery fell $2.70, or 4.4%, to $59.32 barrel (bbl). ICE Brent for March delivery plummeted $2.81, or 4.2%, to $63.78 bbl.

Downstream, NYMEX ULSD futures for February delivery slid $0.0815 to $2.2004 gallon, and front-month RBOB futures tumbled $0.0636 to $1.7969 gallon.

The U.S. Dollar Index was little changed, up 0.273 points to 99.18 against a basket of foreign currencies.

After a 9% rally over five straight sessions, energy prices reversed course following Wednesday's settlement after Trump told reporters he had been informed the "killing in Iran is stopping" and there were "no plan for executions" by the Islamic republic.

Prior to that, large scale anti-government protests had sent geopolitical risks spiking in Iran, raising questions about the security of oil supplies from OPEC's fourth largest producer with an output of 3.2 million barrels per day (bpd). The violent government crackdown on the demonstrations that lasted more than two weeks had left thousands dead, according to human rights groups. Trump had added to the tensions by calling for the protests to continue and threatened the regime in Tehran with airstrikes if it killed more people.

Oil markets risks were also turned down by reports that Venezuela had begun to restart some of its crude production forcibly shut by an U.S. embargo. According to secondary sources polled by OPEC, Venezuelan output in December tumbled below the 900,000-bpd mark for the first time since May.

In the U.S., gasoline inventories continued to expand at a rapid pace, U.S. Energy Information Administration data revealed Wednesday. Total gasoline stocks added 9 million bbl in the week ending January 9, and commercial crude oil inventories grew by 3.4 million bbl, propelling stocks 3.1% and 2.4% above year-ago levels, respectively.