DTN Oil Update
Oil Rebounds from 6-Week Low as Middle East Fighting Widens
VIENNA (DTN) -- Oil and product futures rose Monday morning after U.S. and Iranian forces exchanged fire and Israel pushed deeper into Lebanon, complicating negotiations to end the war which has caused the largest oil supply disruption in history.
By 8:45 a.m. EDT, ICE Brent for August delivery was up $1.74 to trade near $92.86 bbl, and NYMEX WTI for July delivery rose $2.16 to $89.52 bbl.
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Downstream, NYMEX ULSD futures for July delivery advanced $0.0698 to $3.5584 gallon, and front-month NYMEX RBOB futures rose $0.0304 to $3.0648 gallon.
The U.S. Dollar Index edged higher by 0.14 points to 98.995 against a basket of foreign currencies.
Sunday's skirmish was the latest exchange of attacks between the U.S. and Iran in a ceasefire that has mostly held since early April. On Friday, U.S. President Donald Trump said he would soon make a "final determination" on a proposal to extend the ceasefire, a first step in diplomatic efforts to reach a deal with Tehran which would allow traffic through the Strait of Hormuz to resume.
Israel, meanwhile, has stepped up attacks on Lebanon and pushed deeper into Lebanese territory. The cessation of Israeli attacks on the country and on Iran-aligned Hezbollah is one of Tehran's core demands for a permanent peace deal.
Oil prices were still way off recent highs amid signs of negotiation progress. Washington and Tehran have both signaled a willingness to permanently end hostilities, but remain at an impasse on core issues, from Iran's nuclear program to the lifting of naval blockades.
The de facto blockade of the Strait of Hormuz has shut in at least 15% of global petroleum liquid supply for three months, resulting in dwindling inventories and growing shortage risks. Russia was the latest country to impose new restrictions on fuel exports to secure meeting domestic demand, banning exports of jet fuel until the end of November. Ukrainian strikes on Russian refineries which have intensified last month have further curbed global refiner production, adding to an already dire supply situation.
A slowdown in oil demand could alleviate some of this pressure. Market participants widely expect high fuel prices over the past three months to have decelerated economic growth, and will be parsing several key macroeconomic indicators scheduled for release this week, starting with manufacturing PMIs for the U.S. and the Eurozone on tap Monday, followed by new monthly U.S. employment reports later in the week.