DTN Oil Update

Karim Bastati
DTN Analyst

VIENNA (DTN) -- Oil and product futures rallied a second straight day Thursday, hitting six-month highs amid reports of military buildups in the Middle East that raised supply risks.

Large drawdowns in crude, gasoline and distillates reported by the U.S. Energy Information Administration (EIA) added to the market's bullish tone.

U.S. President Donald heightened market concerns over the Middle East by saying that "Iran must make a deal, or bad things will happen" -- a reference to the pressure on Tehran to dismantle its nuclear program, an effort it has thus far resisted.

Media reports since the start of this week have pointed to increasing military activity in the Middle East, including naval exercises by Iran, a buildup of Israeli arsenal as well as U.S. warships that looked poised for action.

Trump appeared to set a timeline on Thursday when he said, "we will find out about Iran in about ten days". Any outbreak of fighting in the Middle East could result in a sustained rally in crude prices, given the region's position as a supplier of a third of the world's oil.

U.S. commercial crude stocks declined by 9 million bbl to 419.8 million during the week ended Feb. 13, the EIA reported.

Gasoline inventories fell by 3.3 million bbl for their first drop in 14 weeks, while distillate balances retreated by 4.6 million, the agency's Weekly Petroleum Status Report showed.

At Thursday's settlement, NYMEX WTI crude futures for March delivery closed up $1.24, or 1.9%, at $66.43 bbl after reaching a six-month high of $66.75. The U.S. crude benchmark rose nearly 5% in the previous session, the most in a day since Oct. 23.

ICE Brent for April delivery finished up $1.31, or 1.9%, at $71.66 bbl after soaring to $72.01, its highest since July 31.

Downstream, front-month ULSD futures were up $0.1023 to $2.6210 gallon, and RBOB for March delivery rose $0.0378 to $2.0058 gallon.

The U.S. Dollar Index strengthened by 0.204 points to 97.825 against a basket of foreign currencies.