DTN Oil Update

Karim Bastati
DTN Analyst

VIENNA (DTN) -- Oil futures extended their decline Wednesday morning on hopes of a detente in the U.S.-Iran war and of a sooner-than-expected resumption of flows from the Middle East.

By 7:25 a.m. EDT, ICE Brent for July delivery was down $2.61 to trade near $108.67 bbl, and NYMEX WTI for July delivery fell $2.11 to $102.04 bbl.

Downstream, NYMEX ULSD futures for June delivery slipped $0.1137 to $4.0488 gallon, and front-month NYMEX RBOB futures retreated $0.0772 to $3.6190 gallon.

The U.S. Dollar Index edged higher by 0.045 points to 99.31 against a basket of foreign currencies.

Tuesday's remarks from the White House weighed on oil futures. U.S. President Donald Trump said he for now prioritized diplomacy over renewed attacks, and U.S. Vice President JD Vance touted progress in peace talks, adding that "the Iranians want to make a deal."

Prices also eased on reports suggesting that NATO was considering a plan to escort ships through the Strait of Hormuz should the Iranian blockade persist through June. This would mark a stark reversal from the defensive alliance's previous stance which limited involvement to post-conflict stabilization.

Two Chinese-flagged and one South Korean VLCC, carrying a combined 6 million bbl of crude oil, attempted to transit the Strait of Hormuz early Wednesday before they stopped transmitting signals. If successful, it would mark the first time in more than three weeks that three laden VLCCs not linked to Iran made it through the blockade. Although largely symbolic given the scale of the supply disruption, a safe passage of the three ships may entice other shippers to attempt the same as Asian refiners grow increasingly desperate for crude oil barrels.

Oil importers have increasingly turned to the U.S. to plug the supply gap, leading to record-high crude and refined product exports from the U.S. rapidly drawing down inventories. The American Petroleum Institute on Tuesday reported across-the-board declines in domestic gasoline, distillate fuel oil and crude oil stocks. The API estimated that commercial crude inventories shrank by 9.1 million bbl in the week ended May 15. If confirmed by official U.S. Energy Information Administration data scheduled for 10:30 a.m. EDT release Wednesday, the fourth consecutive weekly decline in commercial oil stocks would mark the largest since September.