DTN Oil Update
Oil Slumps After Conflicting Reports Over US-Iran Deal
SECAUCUS, N.J. (DTN) -- Crude and product futures reversed course to settle lower Thursday as reports that the U.S. and Iran were close to a deal to reopen the Strait of Hormuz conflicted with statements by Tehran that it was not ready yet for a peace agreement.
Market volatility was also amplified by post-expiry position shifts on NYMEX, as traders rebalanced portfolios in the newly prompt July crude contract ahead of Monday's Memorial Day holiday, triggering intraday swings across the energy complex.
On the Middle East conflict, reports said Pakistani mediators had prepared a peace draft for Iran and the U.S. that will reinforce an existing ceasefire that lasted the past six weeks. The signing parties will agree not to target regional infrastructure and also guarantee freedom of navigation on the Hormuz and the wider Persian Gulf under a joint monitoring mechanism, the reports said.
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U.S. sanctions against Iran will be gradually lifted in return for Tehran's compliance to the deal, with negotiations on outstanding issues beginning seven days after the signing, the reports added.
Energy markets tumbled on the news after rallying earlier on reports that Iran's Supreme Leader Ayatollah Mojtaba Khamenei had refused to transfer the country's enriched uranium to a third country accepted by the U.S.
But just after the settlement of NYMEX trade at 2:30 p.m. EDT, Iranian media reported the country's president and army chief as not in agreement yet with the Pakistani mediation effort.
NYMEX WTI for July delivery settled the day down $1.91 at $96.35 bbl, dropping 2% to extend the previous session's 6% slide.
ICE Brent for July delivery closed down $2.44 at $102.58 bbl, also deepening Wednesday's 6% retreat with a dip of 2%.
Market participants said any further drop in crude prices would depend on Iran's permitting of vessels back on the Hormuz, a waterway it has blocked for most of the near three-month long war, crippling some 20 million bpd of petroleum liquids that account for a fifth of global daily supply.
"Whatever happens, I see WTI holding at $85 and above in the distant future, and Brent at $90 and above," John Kilduff, partner at New York energy hedge fund Again Capital, told DTN.
Among refined products, NYMEX ULSD for June delivery fell $0.1155 to finish at $3.9471 gallon, while June RBOB futures edged lower by $0.1078 to end at $2.2796 gallon.
The U.S. Dollar Index strengthened by 0.171 points to 99.185 against a basket of foreign currencies.