DTN Oil Update
Oil Prices Rise as US Dollar Slumps, ULSD Rally Cools
VIENNA (DTN) -- Oil prices extended their rally on Tuesday, Jan. 27, morning as a plummeting dollar drove energy markets broadly higher, while the impact from the weekend's massive Winter Storm Fern fizzled. President Donald Trump's renewed threat to Iran of U.S. warships having arrived in the Middle East added to the geopolitical risks in energy supplies.
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The Dollar Index plunged to a four-month low of 96.365 against a basket of currencies ahead of the Federal Reserve's decision on U.S. interest rates, due after a two-day policy meeting that ends Wednesday, Jan. 28. Notwithstanding speculation that the Fed might opt for a rate cut, the central bank is expected to keep rates unchanged in a range of between 3.5%-3.75%.
WTI futures for March delivery rose $0.70 to $61.33 bbl, and ICE Brent for March delivery advanced $0.63 to $66.20 bbl.
Downstream, NYMEX RBOB futures for February delivery edged up $0.0106 to $1.8307 gallon.
Front month ULSD futures, meanwhile, bucked the uptrend, retreating from Monday's two-month high after the worst of the Winter Storm Fern had passed. ULSD for February delivery was down $0.0299 to $2.5381 gallon.
In the U.S., freezing temperatures over the weekend forced shut some natural gas and crude oil production, and disrupted operations at Gulf Coast refineries. The bullish effect of these supply outages was mitigated by Kazakh crude oil loadings returning to full capacity and the restart of operations at the country's largest oilfield.
The temporary drop in supply is likely to draw on U.S. inventories in the coming weeks but will have limited impact on the larger global balance which still tilts heavily toward oversupply. The American Petroleum's Institute weekly inventory estimates are scheduled for release later today, followed by the Energy Information Administration's weekly petroleum supply report Wednesday.
President Trump reissued his threat of an U.S. "armada" being in the Middle East, and that he understood Iran was prepared to "make a deal" with the White House. Trump had warned previously of strikes against Tehran for its crackdown on civilian protests that human rights groups said had killed thousands of Iranians. The Islamic republic's regime has vowed an "all-out-war" in the event of a U.S. strike, though it has also said it welcomed talks.