DTN Oil Update

Karim Bastati
DTN Analyst

VIENNA (DTN) -- Crude futures rose 2% and ULSD more than 5% Tuesday morning as the supply disruption of Middle Eastern crude and oil products deepened amid new attacks launched by Iran on neighboring oil infrastructure.

The United Arab Emirates were again forced to suspend loadings at the port of Fujairah after Iran struck an export terminal. As most tankers continued to avoid traversing the Strait of Hormuz, Middle Eastern crude production has been throttled by more than a third so far, with countries that depend on the Persian Gulf for exports like the UAE shutting more than half, and Iraq around three quarters, of oil production.

Threats of Iranian attacks on tankers are keeping 20 million bpd of crude and product flows off the global market, although a handful of tankers from countries not hostile to Iran have started to traverse the chokepoint. Iraq's Oil Minister on Tuesday said he was in contact with the Iranian government to allow some Iraqi oil shipments through the Strait of Hormuz. Iranian oil exports, meanwhile, continued unabated.

The U.S.-Israeli war on Iran looks set to drag on. U.S. President Donald Trump on Monday said the war will be "wrapped up soon, but not this week." Iranian officials, meanwhile, have in recent days repeatedly rejected ceasefire proposals, and have denied reports of recent direct contact with the U.S.

The tightening fuel supply in Asia, meanwhile, is set to worsen as more countries curb oil product exports. Last week, China, the region's largest fuel supplier, banned exports until the end of the month. Some refiners in the region had to drastically reduce operations amid a shortage of crude deliveries from the Persian Gulf. Global middle distillate supply, in particular, tightened amid the sudden loss of 4 million bpd of flows from the Middle East, exports from Asia and refining cutbacks in the hundreds of thousands of bpd.

Near 9:05 a.m. EDT, NYMEX-traded ULSD futures for April delivery were up $0.1934, or 5%, to $4.0309 gallon, and ULSD for May delivery rose 5.75% to $3.7916 gallon. Front-month RBOB futures advanced $0.0710 to $3.0713 gallon.

WTI for April delivery rose $1.36 to $94.86 bbl, and ICE Brent for May delivery added $1.76 to trade near $101.97 bbl.

The U.S. Dollar Index remained flat at 99.470 points against a basket of foreign currencies.