DTN Oil Update
Oil Steadies as Market Weighs Peace Talks, Hormuz Closure
VIENNA (DTN) -- Oil futures edged higher in choppy trading Wednesday morning as market participants tried to ascertain the possibility of a permanent end to the Middle East conflict from a resumption in U.S.-Iranian talks expected this week.
A peace deal could reopen the Strait of Hormuz shut by Iran since the breakout of the war 45 days ago, normalizing the movement of some 20 million bpd of petroleum liquids that could result in lower energy prices. Potential of further delays to a deal, and the likelihood of fighting resuming when a two-week ceasefire expires April 21, could send prices higher.
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Near 8:30 a.m. EDT, WTI for May delivery was up $0.42 to trade near $91.70 bbl, and Brent for June delivery rose $0.68 to $95.47 bbl.
ULSD futures for May delivery advanced $0.0464 to $3.6707 gallon. RBOB futures bucked the trend, with the front-month contract sliding by $0.0215 to $3.018 gallon.
The U.S. Dollar Index inched up by 0.1 points to 98.01 against a basket of foreign currencies.
The White House signaled this week that a diplomatic resolution to the conflict was imminent, with another round of direct talks slated for the end of the week in Islamabad. The risk premium in energy markets has cooled since the ceasefire announced April 7, but physical movement of oil out of the Middle East remains impeded. Iran has selectively allowed tanker movements through the Strait of Hormuz, where about a fifth of global supplies used to pass. But a U.S. blockade since Monday, April 13, of Iranian maritime trade could deepen the global oil supply deficit. The U.S. Navy prevented two tankers from leaving Iran on Tuesday, April 14, and the Treasury Department said it will not renew a temporary sanctions waiver on Iranian oil trade that expires this weekend.
On the diplomatic front, no official date has been set for a second round of talks. U.S. President Donald Trump, however, injected optimism into markets on Wednesday that negotiations could be successful in the new round, saying the war was "very close to over" and that a ceasefire extension might not be necessary.
In the U.S., meanwhile, crude oil inventories continued to expand last week, according to data from the American Petroleum Institute. API late Tuesday reported that commercial crude stocks grew by 6.1 million bbl in the week ended April 10.
If confirmed by official government data scheduled for 10:30 a.m. EDT release today, that would mark the eighth consecutive weekly build. According to the U.S. Energy Information Administration, domestic crude oil inventories have since mid-February expanded by more than 44.9 million bbl, or 10.7%.