Oil Futures Settle Down Tuesday

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures and Brent crude on the Intercontinental Exchange settled lower Tuesday afternoon, with the West Texas Intermediate and Brent contracts easing from fresh 2-1/2-year highs on the resumption of Libyan and Forties crude pipelines and on talk the ongoing unrest in Iran has not disrupted oil supply.

"The Iranian turmoil helped the market earlier, but it has had no impact on production and there's yet no one calling for sanctions, so the oil market is taking a wait-and-see attitude," said Phil Flynn at Price Futures. "We also rallied so much last week that it's time to take a break because a lot of the things were worried about didn't happen [over the weekend], and the cold weather impact has been priced in already."

NYMEX ULSD futures traded at a fresh nearly three-year high overnight.

The 450,000 barrel-per-day (bpd) capacity Forties Pipeline System shut on Dec. 11 after a crack was found in the line in Scotland returned to full operations on Dec. 30, while Libya's al-Zouk pipeline that ships oil to the Es Sider export terminal restarted over the weekend after a one-week shutdown due to an explosion.

In Iran more than 20 people have died since Thursday, Dec. 30, in the largest uprising against the Islamic republic in nearly a decade, with protestors accusing the government of using public resources on regional wars instead of tackling the nation's economic problems. Iran's Supreme Leader, Ali Hosseini Khamenei, has deflected the criticism and blamed foreign enemies of stirring the unrest. In 2009, Iran faced similar unrest following inconclusive elections.

Iran is the third largest crude oil producing member of the Organization of the Petroleum Exporting Countries after Saudi Arabia and Iraq. Iranian oil industry and shipping sources said the protests have had no impact so far on oil production or exports, according to news wires.

"If President Trump calls for tougher sanctions, the market could react, and this may be his chance to get rid of the Iran nuclear deal," Flynn added.

The oil market has been tightening and trader sentiment have been bullish in recent months due to the continuing production cuts by OPEC. The 1.8 million bpd in production cuts by OPEC and 10 non-OPEC producers were implemented in Jan. 1, 2017 and are expected to run through December 2018.

NYMEX February WTI crude futures settled 5 cents lower at $60.37 per barrel (bbl), reversing off a new 2-1/2 year spot high of $60.74. March Brent crude futures contract on ICE settled 30 cents lower at $66.57 bbl, having rallied to a fresh 2-1/2-year spot high of $67.29 in overnight trade. Brent's premium to WTI narrowed slightly to $6.20 bbl at settlement.

NYMEX February ULSD futures settled 0.74 cent lower at $2.0584 gallon, reversing off near a three-year spot high of $2.0906. NYMEX February RBOB futures tumbled 3.27 cents to a $1.7631 gallon settlement.

George Orwel can be reached at george.orwel@dtn.com