DTN Oil

CRANBURY, N.J. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent on the Intercontinental Exchange settled lower Tuesday on the final trade session for April on a perception of greater supply availability, while RBOB and ULSD declined on the month amid concerns over demand while West Texas Intermediate leaked lower in April amid a strengthening U.S. dollar.

June Brent expired $0.54 lower at $87.86 per barrel (bbl), a six-day low, while edging up $0.38 bbl in April. Brent crude did sink $3.31, or 3.6%, from early April as fears of a broadening war in the Middle East as Iran and Israel exchanged direct fire abated, while reports on Tuesday suggest closeness in reaching a ceasefire agreement between Israel and Hamas.

A price cap on Russian oil by a G7-led coalition in response to Moscow's illegal invasion and continued war-making in Ukraine is increasingly having less effect, according to the International Group (IG) of P&I Clubs. According to the 12 marine third-party liability insurers who make up IG, India and China are receiving "high volumes of Russian oil," and it is not entirely clear if the oil is compliant with the price cap mechanism.

"The sale and purchase of Russian oil above the price cap has led to an expansion of a parallel market of traders, shipowners and insurers who operate out of G7 coalition jurisdictions," said IG. "This growth in parallel activities now appears to account for the majority of Russian oil and oil products shipped to third countries which undermines the policy objectives of the OPC regime."

IG provides insurance to shipowners of approximately 87% of the world's oceangoing tonnage.

Canada is set to export more crude oil, with the Trans Mountain Expansion Project set to commence commercial operation Wednesday, Trans Mountain previously communicated on April 3. Capacity on the 1,150-kilometer crude oil pipeline, which runs between Strathcona County, near Edmonton, Alberta, and Burnaby, British Columbia, increases from approximately 300,000 barrels per day (bpd) to 890,000 bpd with the completed expansion.

June WTI fell $0.70 with a $81.93 bbl settlement, a five-week low on a spot continuous basis, while down $1.24, or 1.5%, in April. Slippage in the U.S. crude benchmark coincided with a 1.8% surge in the U.S. dollar in April, which gained 0.6% to 106.100 in index trading against a basket of foreign currencies Tuesday. The dollar strengthened in April on growing expectations that inflation is proving stickier than hoped, likely delaying relief in interest rates. There was more evidence Tuesday with the Bureau of Labor Statistics reporting wages and salaries increased 4.4% during the 12 months ended in April. Wage gains lift costs that are then passed through to consumers.

Inflation was a concern for consumers in April, with The Conference Board Tuesday morning reporting its consumer confidence index fell to a 21-month low 97 reading, with the market having expected an improvement to 104. Dana M. Peterson, chief economist at The Conference Board, said "Elevated price levels, especially for food and gas, dominated consumer's concerns."

Most consumers surveyed by The Conference Board expect higher interest rates over the next year, prompting plans to cut back on discretionary spending, including dining out, entertainment away from home, and vacations, weighing on sentiment for gasoline demand. High-interest rates have also slowed home sales and construction which have reduced manufacturing activity and freight hauling, reducing demand for diesel fuel.

May RBOB futures expired $0.0379 lower at $2.7108 gallon, a six-day low, while sliding $0.1115 or 4% from an April high on demand worries. May ULSD futures expired down $0.0179 at $2.5134 gallon -- the lowest settlement on a spot continuous basis since Dec. 12, 2023. ULSD fell $0.1022 or 3.9% in April.

Brian L. Milne can be reached at brian.milne@dtn.com.