DTN Oil Update

Karim Bastati
DTN Analyst

VIENNA (DTN) -- Oil futures rebounded Thursday morning on reports that Iran's supreme leader had issued a directive ordering that the country's enriched uranium should not be sent abroad. Storing the fissile material outside of the country has been a key U.S. demand in peace negotiations.

At 7:50 a.m. EDT, ICE Brent for July delivery was up $1.77 to trade near $106.79 bbl, rebounding from an intra-day low of $103.68 bbl. NYMEX WTI for July delivery rose $2.20 to $100.46 bbl.

Downstream, NYMEX ULSD futures for June delivery advanced $0.0279 to $3.975 gallon, and front-month NYMEX RBOB futures edged higher by $0.0026 to $3.49 gallon.

The U.S. Dollar Index strengthened by 0.18 points to 99.195 against a basket of foreign currencies.

Oil prices have over the last two trading days softened after statements from Washington and Tehran raised hopes of progress in negotiations to end the war against Iran, which has disrupted a fifth of global oil supply since early March. Khamenei's directive came after days of both sides signaling a willingness to compromise on key issues and cast doubt over U.S. President Donald Trump's assessment that peace negotiations were "in the final stages." Prices clawed back a portion of recent losses, but remained well below Monday's nearly two-week highs.

Bearish economic data from the euro zone, meanwhile, weighed on prices. S&P Global's Purchasing Manager Index for May showed economic activity in the region contracting at the fastest pace in two and a half years amid the ongoing energy supply crisis, with the PMI dropping to 47.5 points, the second consecutive sub-50 reading. Inflationary pressures and logistical constraints caused by the largest oil supply disruption in history, now in week 12, led major forecasting agencies to prognosticate global oil demand this year to shrink for the first time since the pandemic.

Global inventories continued to dwindle at an unprecedented pace. U.S. Energy Information Administration data published Wednesday revealed the largest weekly decline in domestic crude oil inventories on record, with stockpiles in the strategic petroleum reserve and in commercial tanks falling by a combined 17.8 million bpd. International demand for U.S. crude, up 50% from year-ago levels, was the main driver of the unusually fast pace of inventory draws. Over the past four weeks, commercial crude oil stocks on average shrank by 740,000 bpd, a rate normally confined to the summer months when domestic refining activity is at its peak.

Fatih Birol, the head of the International Energy Agency, on Thursday again warned of shortage risks given that the world was entering main summer demand season with crude inventories at multi-year lows and no signs of a slowdown in global stock draws, saying that the global market could enter a "red zone" in July or August.