DTN Oil Update
Oil Down 2% as Demand Fears Eclipse Geopolitical Risk
SECAUCUS, N.J. (DTN) -- Crude futures fell 2% Thursday, reversing a chunk of the prior session's rally, as macroeconomic anxieties and demand destruction fears offset renewed military action in the Middle East and over the Strait of Hormuz.
A day after energy prices surged to multi-week highs following the collapse of the U.S.-Iran ceasefire agreement, traders resorted to profit-taking, citing the partial return of supply stalled by months of prior fighting.
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Inventory data published on Wednesday by the U.S. Energy Information Administration (EIA) disclosed the first weekly rise in commercial crude stockpiles in 11 weeks. Crude balances rose by 3 million bbl to 411.4 million bbl during the week ended July 3, the EIA reported.
Cooling manufacturing margins in China and a hawkish monetary policy stance from the Federal Reserve added to concerns in a market already stressed by demand headwinds.
Goldman Sachs noted that energy shipping traffic on the Hormuz had reached 80% of normal flows by end of last week as tankers rushed to escape the previously blockaded chokepoint after the June 17 ceasefire between the U.S. and Iran. Both sides declared the pact over on Wednesday, July 8, as hostilities resumed.
"Middle Eastern producers have started reopening their shut-in wells over the last month," a Goldman note to clients said.
On the NYMEX, WTI for August delivery fell $1.97 to settle at $71.55 bbl, sliding 2% after Wednesday's 4.4% rise. The U.S. crude benchmark set an intraday low at $71.43 bbl, against a high at $75.13 that came in beneath the prior session's two-week high of $76.08.
ICE Brent crude for September delivery dropped $1.72 to close at $76.30 bbl, posting a 2.2% decline versus the prior session's 5.2% rally. The global benchmark peaked at $79.25 bbl -- beneath Wednesday's $80.59 -- before selling pressure forced it to as low as $75.58.
Downstream, NYMEX ULSD for August shed $0.0859 to finish at $3.5545 gallon. NYMEX RBOB gasoline for August slid $0.0647 to settle at $3.0387 gallon as domestic refined products joined the broader energy selloff.