Oil Rallies to 6-Month Highs on Monday

WASHINGTON, D.C. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Intercontinental Exchange Brent crude moved sharply higher on Monday, with both West Texas Intermediate and Brent rallying to the highest levels in nearly six months on expectations the United States will not renew Iranian oil waivers.

In midmorning trade, WTI May futures surged $1.58 to $65.58 ahead of the contract expiration Monday afternoon, while next month June contract traded at $0.04 premium at $65.58 per barrel (bbl). Nymex ULSD May contract spiked 3.41 cents to $2.1050 gallon, while RBOB May futures surged 6.31 cents to $2.1353 gallon, a fresh six-month high.

Oil futures rallied Monday morning following reports the U.S. State Department is expected to announce the end of a waivers' program for countries purchasing Iranian oil. The United States had previously issued 180-day waivers to eight countries, including China, India and South Korea to continue buying Iranian oil under condition that each country would reduce imports of sanctioned oil. The deadline for renewal is set to expire on May 2. According to State Department, three out of eight countries in that list already dropped Iranian crude oil imports to zero.

Energy Information Administration reported sanctions have taken 1 million barrels per day (bpd) of Iran's oil exports off the market. Earlier this month, the Organization of the Petroleum Exporting Countries, citing secondary sources, reported Iranian crude production in March at 2.698 million bpd, the lowest output rate since October 2013.

Investors have also paid close attention to the latest outbreak of violence in Libya over the long holiday weekend. Libya's capital, Tripoli, was hit by a slew of airstrikes and explosives on Saturday amid an ongoing military offensive by the opposition forces General Khalifa Haftar.

On Friday, reports emerged that U.S. President Donald Trump reached out to the Libyan General to discuss "Libya's transition to a stable, democratic political system." The head of the country's United Nations-backed government said on Sunday Trump's outreach to Haftar would further destabilize the situation on the ground, pushing oil prices higher.

Europe and Gulf countries are divided over Haftar's bid to take over Tripoli, with Russia, Saudi Arabia and United Arab Emirates throwing their financial and diplomatic support behind the General who already controls most of the country's oil fields and the largest military forces.

In the markets, major U.S. stock indexes are approaching fresh records for the first four months of the year with S&P 500 Index gaining more nearly 16% after 2018's turbulent finish. U.S. stocks registered the best performance in nearly three decades so far in 2019, advancing bullish sentiment in the market. On Monday, Dow Jones Industrial Average pulled back 69 points to 26,490.54 amid a modest correction, while S&P 500 edged down 0.14% from Thursday' session close.

Liubov Georges can be reached at liubov.georges@dtn.com