Oil Settles Near Six-Month Highs

WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange West Texas Intermediate and Intercontinental Exchange Brent crude futures settled at fresh six-month highs on Tuesday, as markets continue to reassess risk following the Trump administration's move to end waivers on U.S. sanctions on Iranian oil purchases.

White House decision to end all waivers for the purchases of Iranian oil defied market expectations that the U.S. State Department would grant an extension for partial waivers beyond a May 2 deadline, albeit at lower levels. Swift market reaction reflects the estimates of nearly 1.2 million barrels per day (bpd) of Iranian oil is expected to be removed from the global market in the coming months.

Washington previously issued eight jurisdictions, including China, India and Turkey six-month waivers to continue to buy Iranian crude, giving them time to find alternative supplies. The waivers expire on May 2 and won't be renewed, the administration said on Monday. Oil prices reacted immediately, with the global benchmark surging 2.9% to above $74 per barrel (bbl) on Tuesday, despite U.S. reassurances that Saudi Arabia and United Arab Emirates would help keep the market adequately supplied.

U.S. State Department said on Monday Iranian crude oil exports have plummeted by 1.5 million bpd since the United States' unilateral withdrawal from the 2015 nuclear deal with Tehran in May 2018. The State Department estimates Iran has lost more than $10 billion in oil revenues since the breakdown of nuclear accord.

In defiance of the Trump administration, European Union pledged on Tuesday to continue to work with Iran to ensure Tehran derives economic benefits, as long as the country abides by the terms of the nuclear accord. Some analysts said that Europe's insistence on supporting the Iranian nuclear deal would further elevate tensions with the United States as it seeks to force Iran to renegotiate the terms of the nuclear deal.

Oil futures rally comes ahead of the weekly rundown of U.S. supply data, with calls for U.S. crude stocks to have risen by 500,000 bbl last week, while both gasoline and distillate inventories expected to have been drawdown by nearly 1 million bbl. The American Petroleum Institute, an industry group, issues its supply report at 4:30 p.m. ET for the week ended April 19, ahead of Wednesday's official figures from Energy Information Administration.

Nymex June WTI futures settled up $0.75 at $66.30 bbl, just a penny below a six-month high on the spot continuation chart, with ICE June Brent up by $0.47 to settle $74.51 bbl. Nymex May RBOB futures edged up 0.18cts to settle at $2.1316 gallon, holding below Mondays $2.1489 gallon nearly seven-month high on the spot continuous chart. Nymex May ULSD futures settled 1.40 cents higher at $2.1180 gallon, consolidating below a $2.1242 gallon better-than five-month spot high traded Monday.

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