DTN Oil Update
Oil Futures Hit 4-Month High on Weak USD and Weekly Crude Draw
SECAUCUS, N.J. (DTN) -- Crude futures settled near four-month highs Wednesday, Jan. 28, propelled by a U.S. weak dollar and geopolitical tensions amplified by concerns over a potential U.S. military strike on Iran.
The first U.S. crude inventory decline in three weeks, reported by the Energy Information Administration, also boosted oil. Futures of gasoline edged higher while those for distillates dipped after the EIA cited inventory builds in both.
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The U.S. Dollar Index was up by 0.44 points to 96.475 against a basket of currencies after the Federal Reserve left benchmark U.S. interest rates unchanged in a 3.5%-3.75% range following a two-day policy meeting.
Earlier in the day, the dollar hit a four-year low of 95.705, pressured by declines over four prior sessions. The U.S. currency has lost 5% of its value from its December peak in the aftermath of U.S. trade disputes and coordinated yen interventions by global central banks diversifying their dollar reserves into gold.
Geopolitical risks remained elevated as U.S. President Donald Trump continued to press Iran to make a nuclear disarmament deal with the United States or face the risk of war, as an armada of U.S. warships took positions in the Middle East. Despite Trump's warnings, Saudi Arabia and the United Arab Emirates said they will not allow their airspace or land to be used in any attack on Iran, effectively mitigating some of the risks facing the OPEC member and oil markets.
According to OPEC, Iran consistently produces about 3.2 million. The Strait of Hormuz that straddles the Islamic republic also provides passage to roughly 20 million bpd of crude oil and petroleum products transit equivalent to 20% of the world's total liquid fuel consumption, the EIA says.
On the U.S. inventory front, the EIA said commercial crude stocks dropped by 2.3 million bbl to 423.8 million during the week ended Jan. 23, after back-to-back weekly builds of 3.6 million and 3.3 million bbl.
Gasoline inventories rose for a 12th straight week, rising by 200,000 bbl to 257.2 million. Distillate balances climbed by 300,000 bbl to 132.9 million.
NYMEX WTI for March delivery settled up $0.82, or 1.3%, at $63.21 bbl, after a four-month high at $63.52. The ICE Brent contract for March finished up $0.83, or 1.3%, at $68.31 bbl after peaking at $68.53 earlier -- its highest since September.
Downstream, the NYMEX RBOB futures crude contract for February delivery rose by $0.0267 to $1.8919 gallon, while front-month ULSD futures edged down by $0.0278 to $2.6184 gallon.
