DTN Oil Update
Oil Down on US Peace Plan for Iran; Brent Below $100
VIENNA (DTN) -- Oil futures dropped nearly 5% Wednesday morning, with Brent back below $100 bbl, on news the U.S. have proposed a 15-point plan to negotiate an end to the war with Iran.
Ceasefire hopes, meanwhile, were scaled back by a fresh exchange of attacks between Israel and Iran, and by the mobilization of additional U.S. troops.
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By 8:55 a.m. EDT, NYMEX WTI for May delivery was down $3.81 to $88.54 bbl, and ICE Brent for May delivery fell $4.59 to $99.90 bbl.
Downstream, NYMEX ULSD for April delivery slumped 8%, or $0.3755, to $3.9154 gallon. Front-month RBOB gasoline futures, meanwhile, slid $0.1725 to $2.9755 gallon.
The U.S. Dollar Index softened by 0.242 points to 99.0 against a basket of foreign currencies.
News reports of the White House's 15-point peace plan for Iran, delivered via Pakistani officials, was preceded on Tuesday, March 24, by U.S. President Trump's claims that Iran had agreed to a concession that he likened to a "very big present, worth a tremendous amount of money."
Iran has not yet accepted the offer, although its Fars news service acknowledged that "the U.S. stepped up efforts to secure a ceasefire." Israeli media reported late Tuesday that the 15-point plan will be negotiated during a month-long ceasefire, but neither Israel nor Iran has officially agreed to stop the ongoing fighting.
The U.S.-Israeli war on Iran has for the past three weeks shut in a significant amount of Middle Eastern crude oil production and exports, leading to spiking prices and what the Paris-based International Energy Agency calls the largest oil supply disruption in history.
Yet prices have rallied less than during the first months of Russia's invasion of Ukraine, despite physical crude and product supply being much more affected this time around. Global inventories at a five-year high have provided some cushion. Market participants are also betting on a short-lived conflict despite continued exchange of fire between Iran and Israel amid U.S. diplomatic overtures.
The blockaded Strait of Hormuz, the flashpoint of the energy crisis created by the war, has seen only a handful of oil tankers pass in recent days, after being approved by Iran. Most shippers are avoiding the strait after earlier attacks by Iran on the waterway that used to provide transit to some 20 million bpd of petroleum liquids.
Even if flows are to resume on the strait in the event of a ceasefire or diplomatic settlement, crude production in the region will likely still take weeks, if not months, to return to pre-war levels.