WTI, Brent Futures Down

WTI, Brent Futures Down

OLD BRIDGE, N.J. (DTN) -- Oil futures nearest to delivery traded on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange reversed Thursday's gains Friday on profit-taking. On the week, the Brent, RBOB and ULSD contracts rallied on bullish weekly supply data and on attacks on two Saudi crude tankers in the Red Sea.

The reversal came as market participants contend with a string of conflicting features, including heightening geopolitical risk countered by the prospect U.S. President Donald Trump might tap some of the 660 million bbl of crude stored in the Strategic Petroleum Reserve should prices get too high. Bullish weekly data showing strong demand bolstered NYMEX oil products futures, although there is concern a trade dispute with China could slow global oil consumption.

News broke midweek that Houthi rebels attacked two Saudi-owned very large crude carriers in the narrow Bab al-Mendeb Strait in the Red Sea, and also sent a message that it had the naval capacity to strike at Saudi ports in the region. In response, the Saudis said they would temporarily cease movement through the strait, instead using their East-to-West land-based pipeline to avoid the waterway.

The attacks followed threats by Iran to disrupt crude shipping in the Strait of Hormuz, which borders Iran and Saudi Arabia. The Houthis, allied with Iran, are fighting a Saudi coalition in Yemen.

The Iranian threat comes as U.S. economic sanctions near, which are already cutting into Iranian oil exports. Re-imposed U.S. sanctions on Iran's ability to purchase U.S. dollars take effect on Aug. 6, and additional sanctions including on Iranian oil exports take effect Nov. 4. Oil trades globally in U.S. dollar denominations.

U.S. officials have indicated limited wiggle room for countries seeking waivers from U.S. oil sanctions. This week, Reuters reported Hindustan Petroleum, India's third largest state-owned refiner, was forced to cancel a 1.0 million bbl crude cargo from Iran because its insurance carrier refused to cover the cargo due to U.S. sanctions.

Also at midweek, the Energy Information Administration reported a larger-than-expected 6.1 million bbl draw in commercial crude stocks in the United States during the week ended July 20, with more than 1.0 million bbl of that supply drawn from Cushing, the delivery location for NYMEX West Texas Intermediate futures. It was the tenth consecutive weekly draw at the Oklahoma hub, reducing working capacity to minimum operating levels at 30%.

EIA also reported strong demand for oil products, with gasoline demand near a weekly record high at 9.846 million bpd. Today, EIA noted distillate stocks ended June at their lowest inventory level for June in 14 years.

NYMEX August RBOB futures reversed from a $2.1850 gallon one-month spot high to end flat, down four points at $2.1619 gallon ahead of the contract's expiration Tuesday (7/31) afternoon. The September contract settled at $2.1128 gallon. On the week, August RBOB futures rallied 9.29cts or 4.5%.

NYMEX August ULSD futures settled down 2.17cts at $2.1552 gallon while up 5.08cts or 2.4% from prior Friday. The August contract expires Tuesday, with September delivery ending today down 2.15cts at $2.1594 gallon.

NYMEX September WTI futures settled down 92cts at $68.69 bbl, with WTI down $1.77 or 2.5% on the week on a spot continuous basis, with the August contract having expired prior Friday.

ICE September Brent futures settled down 25cts at $74.29 bbl, while up $1.22 or 1.7% on the week ahead of a Tuesday expiration. October Brent settled down 36cts at $74.76 bbl.

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