DTN Oil Update

Barani Krishnan
DTN Refined Fuels Market Reporter

SECAUCUS, N.J. (DTN) -- Oil prices held steady Wednesday after a two-day rally amid signs that the Middle East's petroleum trade could remain suspended longer than thought as Iran struck at its neighbors to drag them into its war with the U.S. and Israel.

At the close, NYMEX WTI crude futures for April delivery settled up $0.10, or 0.1%, at $74.66 bbl, after an 11% rally over two prior sessions that took the U.S. crude benchmark to a 14-month high of $77.98 bbl.

ICE Brent crude for May delivery finished unchanged at $81.40 bbl, after hitting a 20-month high of $85.12 earlier in the session.

Downstream, ULSD futures for April extended its streak of daily gains for a third consecutive session, rising by $0.0970 to $3.2839 gallon, after climbing $3.3692 in the previous session, its highest since December 2022.

RBOB futures for April delivery climbed by $0.0561 to $2.5135 gallon, after setting a 20-month high of $ 2.5328 this week.

The U.S. Dollar Index dropped by 0.266 points to 98.74 against a basket of currencies, after a three-month high of 99.68 previously.

Maersk, which moves roughly 17% of all global container trade, said it was temporarily suspending acceptance of cargo bookings in and out of the UAE, Oman, Iraq, Kuwait, Qatar, Bahrain, and Saudi Arabia until further notice, according to media reports. Most of those countries have been targeted by Iranian missiles since the start of the U.S.-Israel military campaign against Iran at the weekend.

Iranian forces' strikes on ships entering the Strait of Hormuz have effectively eliminated a fifth of petroleum liquid supply that relied on the waterway bordered by Iran, Oman and the UAE. Reports said tanker traffic on the strait has dropped by at least 90%. The commander of the Iran Revolutionary Guards Navy Alireza Tangsiri added on state media that any ship carrying cargo for Israel in the Gulf, regardless of its flag, would be targeted.

"It's a complete mess at this moment, the dimensions and scale of which I don't think the world had anticipated," a hedge fund manager in oil told DTN. "Iran has virtually blockaded the Hormuz while firing missiles at neighbors that host U.S. and Israeli bases. No one can say for sure how long this will drag and the market is trying to hedge the immediate loss of barrels with supply that will be piling up in storage."

U.S. President Donald Trump initially projected a four-to-five-week timeline for the war but said Tuesday, March 3, that he was in no hurry to end the conflict, prioritizing Tehran's defeat over an expedient finish. The president also pledged U.S. navy protection for tankers needing to cross the Hormuz other than offering to help out with maritime insurance for shippers facing difficulty in covering their cargoes.

Adding to the supply crunch was Iraq's decision to slash oil output it could not ship out due to the situation at the Hormuz. OPEC's second-largest producer announced an immediate reduction of 1.5 million bpd from its regular output of 4.5 million bpd, warning that the cuts could double as it faced a shortage of tanks to store oil it could not export.

On the U.S. inventory front, crude stocks rose by 3.5 million bbl to 439.3 million bbl last week, the highest in 10 months, the Energy Information Administration reported.

Distillate fuel oil inventories also rose, by 400,000 bbl, after the previous week's 300,000-bbl tumble. Jet fuel stocks slipped by 200,000 bbl, along with gasoline inventories, which fell 1.7 million bbl to extend their decline for a third consecutive week.