DTN Oil

WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange settled Thursday's session with sharp losses following unconfirmed reports suggesting the U.S. and Iran have made substantial progress towards reaching a nuclear agreement that could spur on Iranian oil exports.

Although the White House quickly dismissed media reports of a breakthrough, oil futures still ended the session lower as markets assessed the potential for a nuclear deal to be reached in the coming weeks. Israel's Haaretz and other regional outlets cited high-ranking Israeli officials who said the talks are moving forward more quickly than expected, with the possibility for the two sides to reach an agreement as early as June. Iran could restore about 1 million bpd of crude-oil production within months of a deal, traders and analysts said last year before talks broke down. It could be back to full capacity of about 3.7 million bpd by next year. The Persian Gulf country's oil exports already climbed to about 1.3 million bpd in November, and last month held near the highest in four years, according to data from Vortexa Ltd. The deal supposedly includes a concession from Iran to stop the process of enriching uranium to higher levels. In return, the regime in Tehran expects the alleviation of the international sanctions spearheaded by the United States. In the first stage, this would include the releasing of some $20 billion in Iranian assets from frozen bank accounts outside of Iran -- located in South Korea, Iraq, and at the International Monetary Fund. The situation remains fluid.

In financial markets, investors continue to reassess the future path of the federal funds rate after some Federal Reserve officials suggested the central bank will pause interest rate hikes in future meetings to allow the economy to absorb the full cycle of monetary tightening. Money markets are now pricing in a 66% chance the Fed will resume rate hikes when it meets again in July with either a 25 or 50 basis point move to the upside. For next week's meeting, however, investors bet there will be no change in the federal funds rate that currently stands in a 5% to 5.25% target range.

The U.S. dollar index, meanwhile, sold off hard this afternoon, shedding 0.69% against a basket of global currencies to settle at 103.316. NYMEX WTI July futures dropped $1.24 to $71.29 bbl. The front month August contract for the Brent international crude benchmark shed $0.99 to finish at $75.96 bbl. NYMEX RBOB July futures declined $0.0285 to $2.6127 gallon and ULSD July futures weakened $0.0120 to $2.3898 gallon.

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