WTI, Brent Drop in Thursday Trade

WASHINGTON, D.C. (DTN) -- Nearest delivered New York Mercantile Exchange oil futures and Brent crude on the Intercontinental Exchange settled sharply lower on Thursday, with West Texas Intermediate falling nearly 3% on surging U.S. crude inventories, even as the Trump Administration begins enforcing a complete embargo on Iran's crude exports.

Nymex June WTI futures tumbled $1.79 to settle at $61.81 per barrel (bbl), while ICE July Brent dropped $1.43 with a $70.75 bbl settlement. Nymex June ULSD futures moved 1.64 cents down to $2.0778 gallon, while June RBOB futures trimmed a loss to a better than two-week spot low under $2 with a $2.0183 gallon settlement, down 4.59 cents.

Lower session comes despite the expiration of exemptions for buyers of Iranian oil on Thursday, sanctioning all crude exports from Islamic Republic. Iran's oil minister reiterated Thursday that Tehran would continue to supply crude to its customers, but signs point to the challenges of keeping buyers amid the U.S. embargo.

According to Wall Street Journal, a former official at National Iranian Oil Co. said none of Iran's buyers, including China, which normally receives about 400,000 barrels per day (bpd) from Tehran, have committed to buying a cargo for shipment in May. Some analysts believe Iranian crude exports could collapse to a range of 300,000 bpd to 400,000 bpd this summer compared with 2.5 million bpd in May 2018, when Trump said the United States would withdraw from the 2015 nuclear agreement.

WTI futures continue to be weighed down by an unexpectedly steep 9.9 million bbl build in U.S. stockpiles last week, indicating that U.S. crude market is well-supplied. A combination of factors, including a 500,000 bbl draw in Strategic Petroleum Reserve stock and a fresh record high production of 12.3 million bpd during last week of April partly accounted for the sizable increase. Meanwhile, U.S. commercial crude stocks widened a year-on-year surplus to 34.6 million bbl. or 7.9%.

In Venezuela, opposition leader Juan Guaido said on Thursday "there is no turning back" for anti-government protests, as thousands of Venezuelans demonstrated around the country for the third day this week. Opposition efforts failed so far to spur a large number of defectors in military ranks with only one senior regime official—the head of Venezuela's secret service, so far switching sides. Wall Street Journal reported that Venezuela's opposition held secret talks with members of President Nicolas Maduro inner circle last week in an effort to install a united interim government. The talks involved the highest levels of the Maduro regime, including the Defense Minister and Supreme Court Justice, marking the first known contact between the government and opposition since Guaido declared himself interim president in late January. Unrest in Venezuela continues to present a range of uncertainties, disrupting the oil market.

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