DTN Oil Update
Oil Falls 5%, ULSD Tumbles 14% on De-Risking Over Iran
SECAUCUS, N.J. (DTN) -- Crude oil futures fell 5% Monday while natural gas futures plunged 26% amid de-risking by investors in energy markets on reports that Iran was in talks with the U.S. to avoid war over its nuclear program.
Refined oil futures registered substantial losses too, with heating oil closing down 14% and gasoline 4%.
On Friday, crude posted its best monthly advance in 2 1/2 years, with prices settling up 14% for January, as U.S. President Donald Trump told Iran to enter disarmament talks or face military strikes from U.S. warships and forces assembled in the Middle East.
Iran produces 3.2 million barrels per day (bpd) and also straddles the Strait of Hormuz, the waterway for 20% of the world's oil shipments, making Trump's threat a grave one for energy markets.
The U.S. president, however, said Saturday the two nations were "seriously talking" with Iranian officials concurring that negotiations were being arranged.
On Monday, a report added that White House envoy Steve Witkoff and Iranian Foreign Minister Abbas Araghchi were to meet with representatives of several Arab and Muslim countries in the Turkish capital Istanbul discuss a possible nuclear deal.
A rallying U.S. dollar also weighed on energy prices. The U.S. Dollar Index reached a two-week of high of 97.72 after a four-year low of 95.55 last week that boosted prices of most commodities denominated in the greenback, including crude.
Diminished supply risks and restored U.S. and Kazakhstan production add to bearish fundamentals. Most analysts project a 2026 crude oversupply, predicting a significant first-quarter inventory overhang as seasonal refinery maintenance limits demand.
Global manufacturing surveys on Monday presented a mixed outlook for energy demand.
The Institute for Supply Management reported Monday that its U.S. manufacturing PMI surged to 52.6 in January, shattering forecasts of 48.5 and marking the first expansion in 12 months. China's official manufacturing PMI, however, contracted to 49.3, missing expectations of a positive 50 reading.
NYMEX WTI crude futures for March delivery settled down $3.07 at $62.14 bbl. The ICE Brent crude contract for March closed down $3.02 at $66.30 bbl.
Downstream, ULSD for March delivery ended lower by $0.3758 at $2.3598 gallon while
March RBOB futures finished down $0.0714 at $1.8514 gallon. The sharp retreat in ULSD follows improving weather conditions after last week's Winter Storm Fern that led to a spike in heating demand.
Natural gas futures for March delivery settled down $1.117 at $3.2370 MMBtu.