DTN Oil Update
Crude Oil Futures Hit Multi-Week Gains
HOUSTON (DTN) -- Crude oil futures settled higher on Friday, posting multi-week gains, driven by a combination of geopolitical events in the Middle East, the possibility of a ceasefire in the Russia-Ukraine war, stricter sanctions on Iranian oil trade, and expectations of a temporary impact from the trade tariff war on the U.S. economy.
The front-month NYMEX WTI futures contract rose by $0.12 to $68.19 bbl, the highest increase in over two weeks, while the ICE Brent futures contract for May delivery increased rose slightly by $0.07 $72.07 bbl, the highest level since February 28. In the opposite direction, April RBOB futures contract fell by $0.007 to $2.1904 gallon and April ULSD futures decreased by $0.0045 to $2.2498 gallon.
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The U.S. Dollar Index rose by 0.27% to 103.77 against a basket of foreign currencies.
This week, U.S. President Donald Trump and Russian President Vladimir Putin agreed to seek a limited ceasefire targeting energy and infrastructure targets in the Russia-Ukraine war. The announcement came after Israel launched deadly airstrikes across the Gaza Strip, marking a shift since a ceasefire took effect in January. Tensions in the Middle East were also fueled by U.S. airstrikes on Houthi rebels in Yemen over the weekend.
These geopolitical events set a bullish sentiment to start the week, but anxiety over the potential impact of trade tariffs on the global economy and the possibility of a recession in the U.S. put pressure on the oil futures market, causing some analysts to lower their forecast for oil prices to $60 per barrel.
However, on Friday, the bullish sentiment was supported by expectations of limited supplies in the global market as the U.S. government continues to impose stricter sanction on Russia, Iranian and Venezuelan oil sales.
On Thursday, March 20, the U.S Department of State imposed sanctions on China-based Shandong Shouguang Luqing Petrochemical Co., Ltd., a teapot oil refinery, "for purchasing and refining hundreds of millions of dollars' worth of Iranian crude oil." The sanctions also include 12 entities and one individual, as well as eight vessels shipping millions of barrels of Iranian oil to China.
Although anxiety generated by the implementation of trade tariffs on China, Canada, Mexico and the European Union in recent weeks prevails among market participants, the confirmation that the Federal Reserve will maintain its unchanged interest rates policy for 2025, which eased some of the downward pressure the oil futures market experienced this week as well.
The FOMC held a meeting on March 18-19, where board members committed to returning inflation to 2% and to keep its target range for the federal funds rate at 4.25%-4.50% for 2025.
