DTN Oil Update
WTI Joins Brent in $100 bbl Territory Amid Supply Crunch
SECAUCUS, N.J. (DTN) -- The world's two leading crude oil benchmarks both traded in $100 bbl territory Thursday, hitting multi-month highs, as escalating tanker attacks near the Strait of Hormuz and hawkish geopolitical signals from Washington fueled expectations of prolonged global oil supply shortfalls.
Downstream, U.S. diesel futures broke past their previous war-driven record peak established in March.
NYMEX WTI crude for October delivery rose $6.43, or 6.70%, to settle at $102.48 bbl, after soaring to $103.06, its highest since a May peak of $105.21.
ICE Brent for November delivery moved up $6.42, or 6.3%, to settle at $107.63 bbl after running up to $108.42 bbl. The global crude benchmark returned to $100 territory on Wednesday, since an April peak of $114.70.
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Among refined products, NYMEX ULSD for October delivery climbed $0.2565, or 5.34%, to finish at $5.0575 gallon. The session high of $5.0782 set a new peak for ULSD since the outbreak of the Iran war in March.
RBOB for October advanced $0.1826, or 5.69%, to end the session at $3.3932 gallon.
By 2:19 p.m. EDT, the U.S. Dollar Index gained 23 points to 99.040 against a basket of currencies.
Energy futures extended their strength from the start of this week after remarks from U.S. President Donald Trump on Wednesday, Sept. 9, indicated the regional war could extend past the November midterm elections. That contradicted previous Trump administration statements that heralded a swift resolution to the conflict.
Navigating the Strait of Hormuz has grown increasingly perilous after Iranian forces reported targeting 10 vessels near the transit corridor Wednesday in retaliation for earlier U.S. strikes against five Iranian tankers. The intensifying hostilities have further restricted Iranian crude exports while deterring commercial maritime transit through the chokepoint.
Quantifying physical output losses across the region remains challenging. In its September Short-Term Energy Outlook released Wednesday, the U.S. Energy Information Administration (EIA) calculated that Middle East crude shut-ins expanded to 6.7 million bpd in August, up from 5 million bpd in July.
Conversely, OPEC's monthly report published early Thursday estimated a slight month-over-month increase in August output based on secondary sources, as higher Iraqi volume offset declines in Saudi Arabia and Iran.
Direct communication from Saudi Arabia painted a starker picture, with self-reported production plunging to a 36-year low of 6.24 million bpd in August from 8.14 million bpd in July. The International Energy Agency (IEA) is set to issue its August global supply figures on Friday, Sept. 11.
In weekly inventory data released on Thursday, the EIA reported that distillate fuel inventories increased for a second consecutive week during the week ended Sept. 4, while gasoline and jet fuel stocks also built and commercial crude oil inventories edged down as refinery utilization remained high.
Distillate fuel stocks increased by 2.1 million bbl to 106.3 million bbl during the profiled week, following the previous week's 800,000 bbl build.
Gasoline inventories increased by 1.3 million bbl to 206.9 million bbl during the reference week, reversing the prior decline of 1.2 million bbl.
Crude balances fell by 400,000 bbl to 424.1 million bbl during the profiled week and were 600,000 bbl, or 0.1%, below the 424.6 million bbl reported during the same week last year.