DTN Oil

WASHINGTON (DTN) -- Following Monday's explosive rally, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange were modestly lower in early trade Tuesday, as investors monitored progress in U.S.-Iran talks after the United Nations nuclear agency extended its recently expired monitoring agreement with Tehran by a month, and incoming data on inflation in the United States and other major global economies, with central bank officials downplaying the risk of rising prices enduring during a post-pandemic recovery.

A trio of U.S. Federal Reserve officials, including St. Louis Fed President James Bullard and Fed Governor Lael Brainard, reiterated Monday that the pace of inflation will moderate into year's end as base effects fade and supply-chain bottlenecks ease.

"I think there will come a time when we can talk more about changing the parameters of monetary policy, I don't think we should do it when we're still in the pandemic," Bullard told Yahoo Finance, adding "we're not quite there yet" in terms of discussing any changes in Fed policy.

Following soothing comments from the officials, U.S. treasury yields slipped to 1.589% in overnight trading, pressuring dollar index to a fresh 4-1/2 month low at 89.515 against a basket of foreign currencies.

Greenback's weakness comes ahead of a key reading on U.S. consumer confidence from the Conference Board, on tap for 10:00 a.m. ET. Consensus calls for May's index to decrease slightly from April's multi-month high of 121.7, likely weighed down by concerns over rising inflation. Comparable survey on consumer's outlook from University of Michigan showed Americans were more negative about rising prices than at any time since the end of last inflationary era in 1980.

"Importantly, consumer spending will still advance despite higher prices due to pent-up demand and record saving balances. This combination of persistent demand in the face of rising prices creates the potential for an inflationary psychology, fostering buy-in-advance rationales and cost-of-living increases in wages," said Surveys of Consumers chief economist Richard Curtin.

Shrugging off rising airfare prices, data from Transportation Security Administration supports this view, showing more Americans took to the skies over the past weekend than at any point since the beginning of the pandemic. As summer approaches, passenger throughput at TSA checkpoints at U.S. airports reached 1.9 million on Sunday, down just 10% from two years ago, which bodes well for jet fuel demand. Bloomberg estimates that pent-up travel demand could trigger a 30% surge in jet fuel use over the summer even as business traffic remains far below pre-pandemic levels.

On the geopolitical front, markets continue to monitor this week's progress in what is said to be the final round of multilateral talks on the Iranian nuclear program in Vienna. Iran has agreed on Monday to extend its monitoring deal with the International Atomic Energy Agency by a month, which gives access to international monitoring committee to inspect sites for potential nuclear testing.

Last week, Iranian President Hassan Rouhani said that the "main agreement" between Washington and Tehran has been reached, with the United States committing to lifting sanctions targeting Iran's oil, petrochemicals, and shipping.

Near 7:30 a.m. ET, NYMEX July West Texas Intermediate slipped 34 cents to trade at $65.70 per barrel (bbl), and the international crude benchmark Brent contract for July delivery were down modestly near $68.22 bbl. NYMEX June RBOB futures declined 0.65 cent to $2.1112 gallon, while June ULSD futures moved 0.81 cent lower to near $2.0339 gallon.

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