DTN Oil Update
Oil Sinks on Reports of Looming End to US-Iran War
SECAUCUS, N.J. (DTN) -- Energy markets tumbled for a second consecutive session Wednesday, driving U.S. crude futures briefly below $90 bbl, amid reports that the U.S. was ready to end its war with Iran and lift the blockade on Iranian ports as well.
Negotiators in Washington and Tehran were nearing agreement on a one-page memorandum to end the two-month conflict, with the White House expecting Iran to reciprocate by lifting its own blockade on the Strait of Hormuz and setting a timeline for future talks on Tehran's nuclear program.
But optimism over the potential end to the war was obfuscated by reports of fresh attacks by U.S. ally Israel on Lebanese Hezbollah fighters associated with Iran that led to the death of the rebel group's third in command, Ali Karaki.
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The U.S. Central Command in the Middle East also said it had disabled an Iran-flagged oil tanker in the Hormuz on Wednesday. Senior Iranian General Mohsen Rezaee, meanwhile, said Tehran will not allow shipping to resume on the Hormuz on U.S. conditions.
Those developments, along with substantial declines in U.S. crude, gasoline and distillate stockpiles reported by the Energy Information Administration (EIA) for the week ended May 1, helped energy markets to pull back from the lows of the day.
NYMEX WTI crude for June settled down $7.19, or 7%, at $95.08 bbl, after setting a two-week low of $88.66.
ICE Brent for July delivery was, meanwhile, down $8.67, or 8%, to $101.20 bbl by 2:30 p.m. EDT, after a session low at $96.75.
Among refined products, NYMEX ULSD futures for June delivery closed down $0.2446 at $3.7856 gallon. June RBOB on NYMEX finished down $0.1613 at $3.4593 gallon.
The U.S. Dollar Index slumped to among its lowest levels since the start of the war, shedding 0.390 points to 97.92 against a basket of foreign currencies.
U.S. commercial crude oil inventories declined for a second straight week last week, falling by 2.3 million bbl to 457.2 million bbl, the EIA said Wednesday. Distillate stocks hit 20-year lows, sliding by 1.3 million bbl to 102.3 million bbl. Gasoline balances were at their lowest in four months, decreasing 2.5 million bbl to 219.8 million bbl. Jet fuel fell by 600,000 bbl to 43.6 million bbl as refinery utilization climbed to the highest level since late summer.
Notwithstanding the tumble in U.S. energy inventories and surge in domestic fuel prices, a DTN analysis of the EIA data underscored how U.S. petroleum exports had emerged the biggest winner of the historic oil supply disruption caused by the Middle East conflict.
International buyers drove U.S. distillate fuel oil exports to an unprecedented 1.86 million bpd for the week ended May 1, as the two-month Hormuz blockade removed 5 million bpd of refined product supply and 10 million bpd of crude inputs from global markets.
Total U.S. refined product exports smashed records at 8.22 million bpd last week, with jet fuel exports nearly doubling year-on-year levels to 427,000 bpd last week.