DTN Oil Update
Oil Extends Rise on Mounting Tensions, Slowing Flows
VIENNA (DTN) -- Oil prices climbed for a fourth day in early Wednesday morning trade as oil flows through the Strait of Hormuz continued to slow amid new attacks on tankers and rising tensions between Iran and the United Arab Emirates. Prices, however, briefly reversed course in tandem with the U.S. Dollar Index after the U.S. Treasury announced to at least double buyback operations for longer-dated securities.
By 8:58 a.m. EDT, ICE Brent for October delivery fell $0.09 to $90.93 bbl, and NYMEX WTI for September delivery dropped $0.14 to $84.80 bbl.
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Downstream, NYMEX ULSD futures for September delivery retreated $0.0303 to $4.4198 gallon, and front-month RBOB futures softened $0.0139 to $3.2878 gallon.
Following the Treasury announcement, the U.S. Dollar Index dropped to 99.05 against a basket of foreign currencies, down 0.504 points.
Vessel tracking data showed that crossings through the chokepoint remained in the single digits on Tuesday. Traffic has in recent days slowed markedly after Iran stepped up attacks on ships navigating the Strait without Tehran's approval. Before the start of the war in late February, daily transits averaged 130.
Following Iranian strikes on UAE-linked tankers and a refinery Tuesday, Abu Dhabi officially cut economic ties with Tehran, halting all trade and financial transactions. Iran in response again warned countries in the region not to provide assistance to U.S. armed forces.
Several workarounds established over the past six months were able to ease the crude supply disruption stemming from the blockade of the Strait of Hormuz, including Saudi and Emirati pipelines diverting flows to ports outside the Persian Gulf, and shuttling oil onto tankers in the adjacent Gulf of Oman.
Global supply of refined products, suffering from both the lack of Middle Eastern exports and months of crude-shortage-induced low refinery runs outside of the region, remained tighter than that of crude oil. Diesel inventories remained depressed, with U.S. refining margins for the fuel soaring to new records this week.
According to U.S. Energy Information Administration (EIA) data, nationwide stockpiles of ultra-low sulfur diesel are trailing year-ago levels by 7.3% and the five-year seasonal average by 11.5%. The American Petroleum Institute on late Tuesday reported that distillate fuel oil inventories extended their decline by close to 2.8 million bbl last week. If confirmed by EIA data scheduled for release at 10:30 a.m. EDT Wednesday, the draw would leave inventories 8.2% lower than in the corresponding reporting week in 2025.