DTN Oil Update
WTI at $111, Flips Above Brent on Iran Threats
SECAUCUS, N.J. (DTN) -- Oil futures prices resumed their rally Thursday after a two-day reprieve, with WTI trading at a premium to Brent for the first time in four years, as the U.S. and Iran threatened further escalation in the five-week long Middle East conflict.
With U.S. markets ending the week early ahead of the Good Friday holiday, the NYMEX WTI futures contract for May delivery closed up $11.42 at $111.54 barrel (bbl). This was 11% higher than the prior session and 18% above last week.
ICE Brent futures contract for June ended up $7.87 at $109.03 bbl, which is an 18% increase from Wednesday and a 1% gain on weekly basis.
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WTI's $3 premium over Brent came amid extreme backwardation in the time structures of the two benchmarks that reflected short-term supply concerns. May WTI front-month was about $7 bbl higher than June while June Brent was about $9 bbl above July.
Among refined products, RBOB futures for May delivery advanced by $0.1966 to $3.2880 gallon. Front-month ULSD futures soared $0.3043 to $4.3611 gallon.
The U.S. Dollar Index strengthened by 0.382 points to 99.84 against a basket of foreign currencies.
U.S. President Trump escalated his military rhetoric against Iran on Wednesday, pledging to hit the country "extremely hard" and return it to the "Stone Ages." His televised remarks specifically targeted Iranian energy infrastructure for potential upcoming strikes.
Iran, in response, identified infrastructure in Kuwait, Saudi Arabia and the UAE as military targets. It also claimed a cyber-strike on a cloud computing hub in Bahrain on Thursday.
Since the outbreak of the Middle East conflict on February 27, Tehran has maintained a chokehold on the Strait of Hormuz, stranding about 20 million bpd of petroleum liquids.
Iran has alternated between strikes and a murky vetting process to dictate tanker movements on the Persian Gulf's primary artery. Lloyd's List Intelligence has reported 23 direct attacks and 11 crew fatalities on the strait over the past five weeks.
On Thursday, media reports said Iran and Oman, the two countries that border the Hormuz, were drafting a formal protocol to what analysts believe will be the first step towards a toll collection on the waterway. Until now, vessel movement has been untaxed in the region.
Trump had previously warned Iran to free up the Hormuz, but in recent days said the strait was no longer a problem of the U.S., which gets only 10% of its oil from the Middle East.