DTN Oil Update

Karim Bastati
DTN Analyst

VIENNA (DTN) -- Oil futures rose Friday morning as conflicting statements from Tehran and Washington, D.C., cast doubt on the progress of peace talks aimed at ending a conflict that has led to the largest oil supply disruption in history.

By 8:00 a.m. EDT, ICE Brent for July delivery was up $1.94 to trade near $104.52 bbl, and NYMEX WTI for July delivery rose $1.30 to $97.65 bbl.

Downstream, NYMEX ULSD futures for June delivery advanced $0.1148 to $3.9464 gallon, and front-month NYMEX RBOB futures rose by $0.0690 to $3.4486 gallon.

The U.S. Dollar Index edged up 0.06 points to 99.28 against a basket of foreign currencies.

Both sides touted progress in peace negotiations this week before reports emerged that Iran was unwilling to concede to some key U.S. demands. On Thursday, the country's supreme leader issued a directive ordering that their enriched uranium stockpiles should not be sent abroad, and Tehran insisted on a post-war mechanism that would grant them control over the Strait of Hormuz, including the option to collect tolls. U.S. Secretary of State Marco Rubio said that a tolling system would make any diplomatic deal unfeasible.

Other reports, meanwhile, suggested Pakistani mediators had prepared a peace draft for Iran and the U.S. that will reinforce an existing ceasefire that lasted the past six weeks. Iranian officials were studying the newest U.S. proposal delivered via Islamabad and may be meeting with Pakistani envoys over the coming days.

Despite the rebound, oil prices were still on track for a 3% weekly decline amid broader optimism that U.S.-Iranian negotiations were in the final stages. Oil futures trading has been volatile since the start of the conflict, with prices being highly reactive to alternating dovish and hawkish statements out of Washington and Tehran, despite unchanging fundamentals as traffic through the Strait of Hormuz has been almost completely idle since early March, cutting the world off 15-20% of oil and gas liquids supplies. Futures pricing has so far failed to reflect the severity of the physical disruption. Spot market premiums over futures have eased from their peak, but remained significantly above pre-war levels.