Oil Futures Up Amid Iran Rocket Attack

OLD BRIDGE, N.J. (DTN) -- New York Mercantile Exchange oil futures and Brent crude oil on the Intercontinental Exchange settled higher in choppy trade as traders reflected on news of an overnight rocket attack by Iran against Israeli positions in the Golan Heights.

As of the 2:30 PM ET settle, NYMEX June West Texas Intermediate futures settled $0.22 higher at $71.36 bbl, a 41-month spot high. ICE Brent crude for July delivery rose $0.26 to $77.47 bbl, while NYMEX June RBOB futures settled up $0.0217 to $2.1890 gallon. The June ULSD contract was up $0.0048, settling at $2.2228 gallon.

"We're certainly looking at the upper regions of trade based on recent headlines," said Stephen Schork, president of Villinova, Pa.-based Schork Report. "We've seen big spikes yesterday and overnight, so we're basically seeing six to seven dollars of risk built into the price of crude right now."

Schork expects current uncertainty ahead of the weekend to keep a floor below prices.

"Tomorrow's a Friday and recently we've seen people not want to be short going into the weekend, so if anything, it could keep prices up."

The overnight attack and Israeli response follow Tuesday's announcement by U.S. President Donald Trump that the United States would exit the Iranian nuclear deal and re-impose sanctions on Iran. Four of the 20 rockets launched by Iranian positions in Syria struck targets in Israel, penetrating Israel's so-called "Iron Dome" defense system. The attack also prompted an emergency meeting of Israel's Security Council, Fox news reported.

Traders and analysts estimate sanctions on Iran could reduce oil exports by as much as 1.0 million bpd and potentially strain the position of U.S. allies in Europe doing business in Iran. Several companies, including Airbus, Boeing and Total, have struck business deals in Iran and could be examining the idea of seeking exemptions to U.S. sanctions.

Traders said Wednesday's Energy Information Administration weekly supply report was bullish for oil markets, especially motor gasoline. EIA reported total motor gasoline inventories fell 2.2 million bbl on the week to 235.8 million bbl, 2.2% less than the same week in 2017 but still in the upper half of the average range.

Gasoline production fell 71,000 bpd to 9.974 million bpd last week, down 0.8% versus a year earlier. Total motor gasoline imports, which include both finished gasoline and gasoline blending components, fell 120,000 bpd to 803,000 bpd during the week-ended May 4, sliding nearly 16% from a year earlier. Implied demand for the fuel continued higher, soaring 685,000 bpd to 9.775 million bpd, 3.9% above a year ago.

Brian Whary can be reached at brian.whary@dtn.com