DTN Oil Update

Barani Krishnan
DTN Refined Fuels Market Reporter

SECAUCUS, N.J. (DTN) -- Oil futures fell as much as 8% Tuesday after the United States and Iran signaled there could be another round of talks in Islamabad this week, raising fresh hopes for a solution to the Middle East conflict.

NYMEX WTI crude for May delivery settled down $7.80, or 8%, at $91.28 bbl. The crude U.S. benchmark has fallen in three of the past five sessions, losing about 20%, on signs that the U.S.-Iran ceasefire announced a week ago might be replaced by a permanent peace deal.

ICE Brent for June delivery, however, closed down by a more modest $4.57, or 5%, at $94.79 bbl after reports that the U.S. Navy had interdicted six merchant ships to and from Iranian ports, while allowing unhindered passage to a Chinese tanker carrying Iranian oil.

The mixed actions raised caution about the difficulty of restoring safe passage for oil tankers in Middle East waters, particularly the Strait of Hormuz.

Among refined products, NYMEX RBOB futures for May delivery closed down $0.0765 at $3.0395 gallon, while front-month ULSD futures finished $0.2098 lower at $ 3.6243 gallon.

The U.S. Dollar Index softened by 0.263 points to 97.9 against a basket of foreign currencies by 2:30 p.m. EDT.

Through March, WTI rose more than 50% and Brent gained over 60% after a blockade by Iran of the Hormuz, which serves as transit point for some 140 vessels carrying about 20 million bpd of petroleum liquids that make up a fifth of global supply.

With the start of April, however, there were signs that the blockade could ease as U.S. and Israel agreed to halt airstrikes against Iran that began on Feb. 27. Tehran also paused its counterfire at the oil and gas facilities of Gulf nations deemed as U.S. allies. Peace talks held in the Pakistan capital at the weekend failed, but observers said U.S. and Iranian officials could meet again this week.

"Indications we have are that it is highly probable that Iran talks will restart," UN Secretary General Antonio Guterres said.

U.S. President Donald Trump, however, stressed on Tuesday that the United States will not budge from its position that Iran abandons all nuclear ambitions. Media reports said Washington had sought a 20-year guarantee from Iran that it would not enrich uranium, versus the five-year compromise offered by Tehran.

Iranian President Masoud Pezeshkian, meanwhile, warned on Tuesday that the U.S. blockade of vessels entering or leaving Iranian ports would be a deal breaker to any talks.

The International Energy Agency, in its monthly report released Tuesday, said the Iran war is likely to cost some 1.5 million bpd in global oil demand for the second quarter -- the sharpest decline since the 2020 pandemic.

Also, on the supply-demand front, the American Petroleum Institute will release at 4:30 p.m. EDT, its reading on U.S. crude, gasoline and distillate balances for the week ended April 10. In the prior week to April 3, U.S. crude stocks rose by 3.1 million bbl to 464.7 million bbl -- the highest since the week ended June 11, 2021.