DTN Oil Update
Oil Prices Rise to 3-Week High as Peace Efforts Stall
VIENNA (DTN) -- Crude oil futures jumped more than $3 bbl Tuesday morning as efforts to end the U.S.-Iran war have stalled. The two sides remained at an impasse over conditions to continue talks to resolve the crisis which has cut a fifth of petroleum liquids supply off the global market for now two months.
By 8:38 a.m. EDT, NYMEX WTI crude for June delivery was up $3.68, or 3.8%, to $100.05 bbl, after reaching an intra-day high of $101.85 bbl.
ICE Brent for June rose $3.22, or 3%, to $111.45 bbl, after advancing to $112.70 bbl earlier in the session.
Downstream, NYMEX ULSD futures for May delivery edged higher by $0.0022 to $3.9769 gallon, and front-month NYMEX RBOB futures advanced $0.0568 to $3.5478 gallon.
The U.S. Dollar Index strengthened by 0.31 points to 98.625 against a basket of foreign currencies.
The White House on Monday said that U.S. President Donald Trump is not considering Tehran's peace proposal submitted late last week. The proposal reportedly contained a plan to reopen the Strait and end the war but did not address Iran's nuclear program. The U.S. demands any peace deal to address the nuclear issue, while Iran is reluctant to negotiate while under total U.S. embargo.
Pricing suggests that hopes of a quick restoration of flows are fading, and market participants are bracing for a prolonged supply disruption as they are awaiting a U.S. counterproposal in the coming days. Crude oil futures dropped sharply after President Trump in early April announced a two-week ceasefire, which together with rumored negotiations fueled bets on a diplomatic resolution. After a seven-day rise, they are now back near pre-ceasefire levels.
The United Arab Emirates on Tuesday announced they will exit OPEC on May 1. The country, one of the largest oil producers in the coalition, was often opposed to Saudi-led production curtailments given the growth potential of its fossil fuel industry which dwarfed that of most other OPEC members. An end to restrictions on the UAE's oil output would allow the country to reach its declared goal of 5 million bpd by next year. As long as the Strait of Hormuz remains closed, however, this decision does not impact global supply in any way. The market reaction to the announcement was consequently muted.
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