DTN Oil Update
Oil Slides but on Track for Largest Weekly Jump Since July
VIENNA (DTN) -- Oil futures retreated Friday morning but remained on track for the largest weekly gain in seven weeks on elevated supply risks caused by the flare-up in fighting in the Middle East.
By 9:30 a.m. EDT, ICE Brent for November delivery was down $3.67 to trade near $103.96 bbl, and NYMEX WTI for October delivery fell $3.71 to $98.77 bbl.
Downstream, NYMEX ULSD for October delivery edged lower by $0.0094 to $5.0481 gallon, and front-month RBOB futures retreated $0.0642 to $3.3290 gallon.
The U.S. Dollar Index edged higher by 0.023 points to 99.07 against a basket of foreign currencies.
Reports that Iran was in negotiations with Gulf states to establish a jointly managed shipping route through the Strait of Hormuz weighed on prices. At the same time, however, physical oil supply disruptions and risks to flows have continued to grow. Ship tracking data showed that daily transits of the oil chokepoint fell back into the single digits on Thursday. In Yemen, Tehran-allied Houthis captured a port and island at Bab al-Mandeb, the waterway connecting the Red Sea to the Indian Ocean, putting future Saudi oil exports at greater jeopardy. The group on Thursday also launched fresh attacks on Saudi Arabia, including on areas traversed by the country's East-West pipeline that reroutes crude oil away from the Persian Gulf.
The outsized impact on diesel of the now more than six-month long supply disruption was evident in recent price developments. Despite crude benchmarks retreating around 3% in early morning trade, ULSD for October delivery remained flat. On Thursday, the contract surpassed the $5 gallon mark for the first time since the Russia-Ukraine war induced rally of 2022. Diesel prices in the U.S. just last week surged to new record highs, and early data indicated that the national average at the pump was on the verge of surpassing the $6 gallon mark amid a tightening global market.
The International Energy Agency (IEA), meanwhile, now sees even steeper demand destruction this year. In its latest monthly oil report published today, the Paris-based energy watchdog revised its 2026 demand growth forecast from a 1.6 million bpd to a 2.5 million bpd decline. The conflict dragging on for longer than anticipated, however, had an even bigger impact on the supply side, with the IEA raising their supply deficit estimate for this year from 1.27 million bpd to 1.74 million bpd.
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