DTN Oil Update
Oil Rallies Amid Trump's Warning of Prolonged Iran War
SECAUCUS, N.J. (DTN) -- Oil and product futures hit multi-month highs Monday as an escalating U.S.-Israel military campaign against Iran and Tehran's retaliatory strikes fueled fears of a wider Middle East contagion that could paralyze the Strait of Hormuz oil transit.
The oil futures rally was capped by OPEC's announcement that it will raise output in April to mitigate lost supply. But the downside was also limited by U.S. President Donald Trump's remarks that the war could drag beyond the initial 4-5 projected weeks. "We have capability to go far longer than that; whatever it takes," he said.
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Some energy markets experienced their largest one-day price spike since Russia's invasion of Ukraine four years ago. Crude futures soared 12% initially as U.S.-Israeli bombs pounded Iran, killing -- according to the White House -- some 48 senior Iranian leaders, including the country's Supreme Leader Ayatollah Ali Khamenei. Tehran retaliated with missiles aimed at neighboring Gulf capitals.
The rally gained steam as maritime traffic through the Strait of Hormuz that straddles Iran effectively collapsed, leaving the world's most vital energy corridor at a de facto standstill. Approximately 20% of the global petroleum supply transits the narrow passage, which is now considered too high-risk for commercial tankers to navigate.
OPEC+ members agreed Sunday to increase April output by 206,000 barrels per day (bpd) following a three-month production pause. This modest hike arrives as Saudi Arabia separately added 500,000 bpd to the market in anticipation of Mideast supply shocks. The move follows a massive 2.9 million bpd quota increase last year by core members to offset previous voluntary cuts.
NYMEX WTI for April delivery surged to a nine-month high of $75.33 barrek (bbl) before closing the official session at $71.23, up $4.21, or 6%, on the day.
ICE Brent crude for May delivery hit a 14-month high of $82.37 before settling at $77.74, up $4.87, or 6.7%.
Downstream, ULSD futures for April delivery rocketed to a 16-month high of $ 3.0486 gallon before closing at $2.9004, up $0.5298.
The gasoline contract for March surged to a nine-month high of $2.4955, before settling at $2.3706, up $0.2927.
The dollar's rally to a five-week high blunted energy price momentum by making greenback-denominated commodities costlier for foreign buyers. The U.S. dollar index rose 1.01 points to 98.575, hitting a peak of 98.725 not seen since January. Traders attributed the surge to a classic flight to quality as investors sought refuge in the security of U.S. assets.