WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange oil futures nearest to delivery and Intercontinental Exchange Brent futures moved higher in overnight trade, supported by escalating geopolitical tensions in the Strait of Hormuz, while market participants await weekly supply data and monthly market outlooks.
Near 9 a.m. ET, NYMEX August West Texas Intermediate futures were up $0.40 near $58.05 per barrel (bbl), and ICE September Brent gained $0.40 to near $64.50 bbl. NYMEX August ULSD futures were up 0.65 cents to near $1.9020 gallon, with the August RBOB contract 1.75 cents higher near $1.9190 gallon.
Geopolitical tensions in the Middle East flared up again on Tuesday after a British-flagged oil tanker aborted the crude shipment through the Strait of Hormuz amid threats of seizure from Iran. British military arrested last week a tanker carrying nearly 2 million bbl of Iranian oil passing through Strait of Gibraltar—a move that Iran vowed to retaliate.
The latest spike in tensions between Iran and Western powers increased the possibility of disruption to oil flow through the most vital chokepoint for crude shipments, injecting a geopolitical premium into oil markets. Investors grew increasingly conscious of the risk for regional conflict after Iran announced on Sunday it breached the 2015 nuclear agreement and started the process of deactivating nuclear centrifuges.
Domestically, Federal Reserve Chairman Jerome Powell is scheduled to testify to Congress on Wednesday and Thursday, likely giving investors insight into U.S. monetary policy ahead of the Federal Open Market Committee's meeting on July 30-31. Market participants reduced expectations for an aggressive 50-basis point rate cut after a better-than-expected U.S. jobs report indicated ongoing strong growth in domestic economy and job market. U.S. dollar rose to 97.140, a better than three-week high in overnight index trade, capping the upside for the U.S. crude benchmark.
Oil futures' move higher comes ahead of key reports that could sway market participants' near-term outlook of the global supply-demand disposition. Energy Information Administration will release its Short-term Energy Market Outlook near 12 p.m. ET, while Organization of the Petroleum Exporting Countries and Paris-based International Energy Agency will publish their monthly reports Thursday and Friday (7/11-12).
In addition, American Petroleum Institute is set to release weekly supply figures on U.S. inventories at 4:30 p.m. ET, which will be followed by more definitive weekly data from EIA on Wednesday.
Market participants expect U.S. commercial crude stocks fell 4.2 million bbl in the week ended July 5, with mixed estimates for refined products. Analysts call for gasoline inventories to have declined 1.2 million bbl in the profiled week and distillate stockpiles to have increased 1.4 million bbl.
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