DTN Oil Update
Oil Futures Fall 4% as Trump Winds Down US-Iran Tensions
SECAUCUS, N.J. (DTN) -- Crude futures tumbled by more than 4% Thursday after a wind down in U.S.-Iran tensions snapped a five-day rally in oil.
Concerns that inventories of U.S. crude and gasoline could pile up amid seasonally weak winter demand for fuels also weighed on markets.
"It's back to the drawing board on supplies, only this time the focus is on the likelihood that we have more supply than we need, and that prices need to correct after going up too much, too fast," said John Kilduff, partner at New York energy hedge fund Again Capital.
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In the span of a week between last Wednesday (1/7) and yesterday (1/14), crude prices jumped almost 9%, hitting three-month highs, as anti-government demonstrations in Iran sparked concerns about the future of crude supplies from a country ranked OPEC's fourth largest producer, with an output of 3.2 million barrels per day (bpd).
Heightening the tensions were U.S. President Donald Trump's urging that the protests in Iran continue, while he hinted at the same of airstrikes against the regime in Tehran if civilian deaths mounted.
But Trump suddenly switched course Wednesday afternoon, saying he had been informed that the situation in Iran was improving. That led to a dramatic pullback in crude prices.
Supply risks also abated amid reports that Venezuela had begun to restart some of its crude production forcibly shut by U.S. sanctions. The development came after secondary sources polled by OPEC reported Venezuelan output in December at below the 900,000-bpd mark for the first time since May.
Surging U.S. inventories had put the market on a backfoot too. U.S. Energy Information Administration data Wednesday showed gasoline up 9 million barrels (bbl) in the week ended Jan. 9, and commercial crude oil inventories growing 3.4 million bbl -- propelling stocks 3.1% and 2.4% above year-ago levels, respectively.
NYMEX WTI futures contract for February delivery settled down $2.83, or 4.6%, at $59.19 bbl. ICE Brent for March delivery closed down $2.76, or 4.2%, at $63.76 bbl.
Front-month NYMEX ULSD futures contract slid $0.0792 to $2.2027 gallon, and RBOB futures contract for February delivery retreated $0.0529 to $1.8076 gallon.
The U.S. Dollar Index rose 0.213 points to 99.12 against a basket of foreign currencies.
