DTN Oil Update

Barani Krishnan
DTN Refined Fuels Market Reporter

SECAUCUS, N.J. (DTN) -- Oil futures reversed early gains from Tuesday that propelled the market to five-month highs, settling lower on ongoing market digestion of U.S. sanctions relief for Russian diesel.

Prompt-month NYMEX WTI crude for November delivery fell $1.87, or 1.80%, to settle at $101.79 bbl, after an intraday high at $110.48. The more actively traded December contract slipped $0.72, or 0.73%, to close at $97.82 bbl.

ICE Brent crude for December delivery dropped $0.76, or 0.69%, to settle at $108.79 bbl after touching a session peak of $111.99 bbl.

Downstream markets were split. NYMEX ULSD for November delivery edged up $0.0049, or 0.10%, to finish at $4.9250 gallon, pulling back after topping $5.0182 gallon earlier in the day. Front-month RBOB gasoline retreated $0.0742, or 2.32%, to close at $3.1172 gallon.

By 3:32 p.m. EDT, the U.S. Dollar Index fell 0.246 points to settle at 101.525 against a basket of foreign currencies.

The late sell-off represented a sharp reversal from early-morning trade, when futures surged on mounting supply threats in the Middle East. The United Kingdom Maritime Trade Operations Center reported 30 attacks in and surrounding the Strait of Hormuz so far this month, while commodity intelligence firm Kpler confirmed 18 verifiable ship strikes over the past two weeks alone.

Tehran-aligned forces also expanded targeted operations beyond the Persian Gulf into the Gulf of Oman -- threatening a key offshore ship-to-ship transfer route utilized by Saudi Arabia to bypass the strait.

Meanwhile, escalation by Houthi rebels targeting Saudi infrastructure, including alleged drone strikes near the Shaybah oil field and the Red Sea port of Yanbu, prompted Saudi authorities to postpone a major economic forum citing security concerns.

Despite the heightened physical risks in the Persian Gulf, late-day market momentum was dominated by traders unwinding long positions ahead of WTI contract expiration, combined with expectations that temporary U.S. sanctions waivers on Russian diesel shipments will gradually augment global middle distillate supplies.

Market participants now turn their attention to weekly inventory reports for directional cues. The American Petroleum Institute releases its weekly crude and product stocks estimate late Tuesday afternoon, followed by official data from the U.S. Energy Information Administration on Wednesday, Oct. 21, morning.

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