DTN Oil Update

Karim Bastati
DTN Analyst

VIENNA (DTN) -- Oil prices slid Friday morning after U.S. President Donald Trump touted "productive discussions" with Iran and said that he will not order attacks on the Islamic Republic ahead of the midterm elections on Nov. 3. News that China set to resume fuel exports following a one-week suspension also eased supply woes. A slew of attacks on oil and LPG tankers in the Strait of Hormuz, meanwhile, limited the downside.

By 9:15 a.m. EDT, ICE Brent for December delivery was down $1.19 to trade near $103.09 bbl, and NYMEX WTI for November delivery fell $0.79 to $90.70 bbl.

Downstream, NYMEX ULSD for November delivery slid $0.0983 to $4.7846 gallon, and front-month RBOB futures retreated $0.0305 to $3.2855 gallon.

The U.S. Dollar Index strengthened by 0.155 points to 102.085 against a basket of foreign currencies.

The President's statements helped to cool resurging escalation fears which were stoked by several reports suggesting the U.S. administration was mulling fresh attacks on Iran and had tasked the Pentagon with drafting strike options. Further fueling concerns, Iran has recently stepped up attacks on ships in the Strait of Hormuz, with strikes so far in October being more frequent than at any other point during the more than seven-month long war.

Prospects of an imminent diplomatic solution have also been dimming on reports that the first direct negotiations in months, started at the sidelines of the U.N. General Assembly in New York two weeks ago, had ended in a stalemate. The recent ramp up in Iranian attacks on commercial vessels was interpreted by some observers as a sign that recent talks were unproductive.

Elsewhere, China was reportedly set to lift a de-facto fuel export ban that had rattled already supply-starved markets. The country did not grant any refined fuel export quotas for the duration of its week-long national holiday at the beginning of October. Canceled cargoes and the lack of communicated timeline had market participants concerned about yet another global fuel supply source drying up.

Now a Category 2 Hurricane, Isaias has as of Thursday, forced shut operations at 130 U.S. offshore platforms, affecting around 1.3 million bpd of crude oil production. The first Hurricane of the season is expected to make landfall late Friday or early Saturday in an area that houses several important refineries, with Marathon's more than 600,000 bpd capacity Garyville refinery in Louisiana being the largest.

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