DTN Oil Update
Oil Falls Below $80 on Prospects of US-Iran Agreement
HOUSTON (DTN) -- Oil futures prices sank below the $80 bbl mark on Tuesday, hitting three-month lows as prospects for a United States-Iran agreement to end hostilities and the reopen the Strait of Hormuz would restore disrupted oil supplies.
The NYMEX WTI for July delivery dropped $4.36, or 5.40%, to $76.39 bbl, its lowest close since March 10, when it was at $76.93 bbl, according to DTN data. ICE Brent for August delivery declined $3.92, or 4.71%, to $79.25 bbl, marking its lowest value since March 6, when it was at $79.86 bbl.
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Downstream, NYMEX ULSD futures for July delivery slid $0.0832 to $3.1833 gallon, and front-month NYMEX RBOB futures retreated $0.0618 to $2.8854 gallon.
The U.S. Dollar Index remained little changed, up 0.091 points to 99.285 against a basket of foreign currencies.
U.S. and Iranian officials are scheduled to sign an interim deal in Switzerland on Friday, June 19, that would reopen the Strait of Hormuz. Tehran said on Tuesday that the U.S. blockade of Iranian ports is being lifted, while vessel-tracking data showed several Iranian oil tankers moving toward the Gulf of Oman.
Hundreds of laden oil tankers remained anchored in the Persian Gulf, with only limit traffic through the Strait of Hormuz despite the announcement of a peace deal a day earlier, as shippers awaited clearer assurances on navigational safety, including the removal of Iranian sea mines. A wave of crude oil is expected to flow once a deal is signed, offering a relief to a supply-starved market.
While some analysts expect oil supply to return to pre-war levels by the end of July, others are more cautious given the extent and duration of the supply disruption. Damaged energy infrastructure, shut-in oil fields and logistical hurdles can pump the brakes on the expected supply surge and drag out the return of oil output for months.
Refined fuel spot prices have recently indicated some demand weakness, with the premium of physical barrels over futures returning to pre-war levels in many markets.
Downstream, the Energy Information Administration reported on Tuesday that the national average for retail regular gasoline declined for a third consecutive week in the week ended June 15. The U.S. average for regular gasoline fell 9.4cts to $4.052 gallon last week, while remaining 91.3cts above the same week last year and 61.7cts higher than two years ago, the EIA's weekly fuel pricing update showed.
Meanwhile, U.S. average retail diesel prices dropped for a fifth consecutive week during the week ended June 15, with the national average easing 15.1cts to $5.059 gallon. Compared with the same time last year, diesel nationwide was up $1.488 gallon on average.