DTN Oil Update

Barani Krishnan
DTN Refined Fuels Market Reporter

SECAUCUS, N.J. (DTN) -- Crude prices retreated Tuesday, with WTI settling beneath the key $100 bbl mark, as traders weighed diplomatic efforts in Tehran against mounting physical supply risks in the Middle East.

Broader caution ahead of the Federal Reserve's upcoming interest rate decision and firming U.S. dollar positioning also pressured energy futures into the close despite initial intraday advances across crude and refined products.

NYMEX WTI crude for December delivery fell $1.86, or 1.83%, to settle at $99.90 bbl, after rising to $102.82 during the session.

ICE Brent for December delivery closed down $1.93, or 1.7%, at $113.88 bbl. The session high was $116.95 versus a low of $113.35.

Downstream, NYMEX ULSD for November delivery eased $0.1368, or 2.79%, to finish at $4.7752 gallon. It peaked at $4.9541 for the day.

RBOB for November retreated $0.0809, or 2.51%, to end the session at $3.1376 gallon. It hit an intraday high of $3.2575.

By 2:53 p.m. EDT, the U.S. Dollar Index gained 0.365 points to 102.165 against a basket of currencies, placing additional cap on dollar-denominated commodities.

Diplomatic headlines initially offered modest market relief following talks in Tehran on Monday between Iranian officials and mediators from the newly formed Mecca Defence Alliance, comprising Saudi Arabia, Turkey and Pakistan.

While both sides agreed to maintain dialogue to prevent further regional military escalation, market participants noted the lack of any formal ceasefire or binding agreement to end attacks on vital maritime corridors.

Physical supply concerns continue to underpin underlying market fundamentals despite Tuesday's price retreat. Ship-tracking data indicates crude exports from the Persian Gulf have slipped to approximately 65% of pre-conflict levels, down from 90% at the start of October, as intensifying anti-ship missile threats discourage tanker transit through the Strait of Hormuz.

Uncertainty also persists regarding Saudi Arabia's East-West pipeline capacity following claims by Tehran-aligned Houthi forces that they targeted a key pumping station along the bypass route. With Saudi Aramco yet to clarify the scope of potential damage, questions remain over the kingdom's ability to maintain full crude divert ability to the Red Sea port of Yanbu.

Macroeconomic positioning further constrained buying interest, with market participants adjusting portfolios ahead of Wednesday, Oct. 28, afternoon's Federal Open Market Committee rate decision and press conference. Additional geopolitical focus remains trained on Israel's general election on Tuesday, as traders assess how the political outcome could impact upcoming military strategy across the region.

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