DTN Oil Update

Karim Bastati
DTN Analyst

VIENNA (DTN) -- Oil futures were on track for their third consecutive weekly decline Friday morning as oil exports from the Persian Gulf have soared following a U.S.-Iranian agreement which allowed for a reopening of the Strait of Hormuz.

By 8 a.m. ET, ICE Brent for August delivery was down $2.17 to trade near $73.09 bbl, and NYMEX WTI for August delivery fell $1.81 to $70.11 bbl.

Downstream, NYMEX ULSD futures for July delivery retreated $0.0650 to $3.2332 gallon, and front-month RBOB futures slid $0.0553 to $2.9720 gallon.

The U.S. Dollar Index softened by 0.14 points to 101.055 against a basket of foreign currencies.

The selloff came as oil flows through the strait jumped to around three quarters of pre-war levels and amid growing confidence the choke point will remain freely traversable. An Iranian attack on a cargo ship on Thursday briefly tested the current ceasefire, but both Washington and Tehran were quick to announce their intention to keep the waterway open.

The scale of outbound flows, estimated to have averaged 12 to 15 million bpd over the last three days, fueled bearish market sentiment. This export pace, however, is unlikely to be sustained over the coming weeks, as the initial wave of oil passing the strait consisted of tankers that have been stranded in the Persian Gulf for months. Many producers in the region have restarted cargo loadings over the past few days, but inbound traffic of empty tankers remained at a fraction of pre-war levels.

While crude futures have shed almost all of their war gains, refined product futures continued to trade considerably above prices on Feb. 27. The reopening of the Strait of Hormuz freed up crude supplies, but the three-month long lull in global fuels production resulting from the limited availability of crude oil and high prices will take longer to end as refiners start to ramp up operations amid a restoration of supply chains.