DTN Oil Update

Karim Bastati
DTN Analyst

VIENNA (DTN) -- Crude oil futures steadied Friday morning on cooling U.S.-Iran tensions but remained well on track for their sixth consecutive weekly increase, and the largest in three months.

WTI futures for March delivery slid by $0.21 to $65.21 bbl, and ICE Brent for March delivery retreated $0.16 to $70.55 bbl.

ULSD futures bucked the trend, continuing to rise after hitting a two-month high earlier this week. Front-month ULSD futures advanced by $0.0648 to $2.6502 gallon. RBOB for February delivery, in contrast, slipped by $0.0054 to $1.9146 gallon.

Iran, the fourth largest oil producer within OPEC -- output averages 3.2 million bpd, has been at the center of the growing geopolitical risk premium which has been pushing oil prices higher so far this year. Mass protests against Iranian regime, their subsequent violent crackdown and repeated threats of U.S. military intervention have fanned supply woes.

U.S. President Trump said U.S. war ships had arrived near Iran and warned of potential strikes on the country's leadership. On Thursday, however, Trump said he planned to pursue negotiations with Iranian officials, easing concerns of an immediate strike.

Separately, Trump announced on Friday that he has picked former Federal Reserve governor Kevin Warsh to be the next chairman of the Federal Reserve. While Trump had repeatedly called on the Fed to lower interest rates, market observers see Warsh as a monetary policy hawk. The announcement supported the dollar and pressured commodities and equities.

The U.S. Dollar Index strengthened by 0.398 points to 96.535 against a basket of foreign currencies.

Also, the Bureau of Labor Statistics on Friday reported that U.S. producer price inflation remained sticky. In December, the Producer Price Index rose 0.5% month-on-month, compared to 0.2% in November and 0.1% in October. The increase came on the back of a jump in margins for final demand trade services.