DTN Oil Update

Karim Bastati
DTN Analyst

VIENNA (DTN) -- Oil futures edged lower Tuesday morning, extending their decline from the previous session on signs of an easing Middle East oil supply disruption as tanker traffic through the reopened Strait of Hormuz was picking up steam.

By 8:00 a.m. ET, ICE Brent for August delivery was down $0.13 to trade near $77.77 bbl, and NYMEX WTI for August delivery eased by $0.03 to $73.83 bbl.

Downstream, NYMEX ULSD futures for July delivery retreated $0.0173 to $3.0758 gallon, and front-month RBOB futures softened by $0.0092 to $2.9778 gallon.

The U.S. Dollar Index strengthened by 0.245 points to 101.04 against a basket of foreign currencies.

Crossings have ticked higher after the U.S. and Iran last week agreed to reallow traffic through the energy choke point. Marine tracking data on Tuesday showed the most tankers in months signaling their intention to cross the strait, which has now been traversable for the longest continuous period since the initial closure in early March.

On Monday, the U.S. suspended its sanctions on Iranian oil trade for 60 days. Aside from easing supply tightness, the measure, in conjunction with the lifting of the U.S. naval blockade, also raised market participants' confidence in a lasting truce and fruitful peace talks.

Commercial oil inventories and strategic reserves have plummeted globally during the 100-day long disruption of at least 10 million bpd of crude oil and millions of bpd of refined product supply. The U.S. Energy Information Administration data last week showed that domestic road fuel inventories continued to hover near the seasonally lowest in more than a decade. On Monday, the EIA reported that stockpiles in the Strategic Petroleum Reserve have fallen to the lowest level since 1983. Crude oil volumes in the U.S. SPR have since April dropped by more than 84 million bbl, which so far amounted to nearly half of the announced 172 million bbl release.

Analysts are expecting further declines as Middle Eastern supply starts to gradually ramp up and fuel demand is on a seasonal rise. Weekly inventory estimates by the American Petroleum Institute are scheduled for release later today, followed by official government data on Wednesday.