DTN Oil Update
Oil Slips as US Attempts to Free Hormuz Strait
VIENNA (DTN) -- Oil and product futures fell Tuesday morning on U.S. attempts to clear the Strait of Hormuz blocked by Iran as ramped up hostilities kept the key waterway for energy markets at the front and center of the Middle East conflict.
By 8:00 a.m. EDT, ICE Brent for July delivery fell $1.87 to $112.57 bbl, and NYMEX WTI for June delivery slipped $2.51 to $103.91 bbl.
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Downstream, NYMEX ULSD futures for June delivery retreated $0.0331 to $4.0401 gallon, and front-month NYMEX RBOB futures softened by $0.0537 to $3.6845 gallon.
The U.S. Dollar Index advanced by 0.1 points to 98.36 against a basket of foreign currencies.
Energy prices slid as U.S. Defense Secretary Pete Hegseth, at a news conference with top U.S. general Dan Caine, said dozens of ships were lining up in the Hormuz for U.S. help to cross the narrow chokepoint which Iranian forces have blocked for most of the 66 days since the U.S.-Israel war against Iran began. The blockade, along with a U.S. embargo on any vessel movement in and out of Iranian ports, has virtually paralyzed the Middle East oil trade which used to supply a fifth of the world's daily energy needs.
An U.S.-Iranian ceasefire, in place since early April, looked to stand on shaky ground after an exchange of attacks on Monday resulting from a U.S. attempt to force open the Strait of Hormuz. The U.S. military said it had destroyed six Iranian boats approaching a Navy ship, after Iranian warning shots earlier in the day forced another U.S. warship attempting to breach the blockade to turn around.
Iran in response launched a fresh wave of missile and drone attacks on the United Arab Emirates, causing a fire at the port of Fujairah, one of the most important oil storage, refining and export hubs in the region. Monday's U.S. and Iranian attacks fueled concerns of the ceasefire breaking, leading front-month Brent futures to rally by almost 6%.
On top of a rising geopolitical risk premium, most oil supply from the region continued to be disrupted. U.S. attempts to restart flows, which President Donald Trump dubbed "Project Freedom," have so far failed as vessel traffic through the vital energy chokepoint continued to be at a virtual standstill.
Amid the escalation in fighting, Washington D.C. and Tehran continued to tout "progress" on the diplomatic front, moderating the rise in the risk premium. A second round of negotiations, however, has yet to be held after direct talks mediated by Pakistan more than three weeks ago yielded no results.