DTN Oil Update
WTI Trades Below $90 on Hopes of a Ceasefire
HOUSTON (DTN) -- Oil futures dropped Wednesday amid hopes for a ceasefire agreement between the United States and Iran that could end the dual-blockade of the Strait of Hormuz, which has been in place since March.
Late Tuesday, Iran's navy reported that 25 commercial vessels -- including two VLCCs carrying a combined 4 million bbl of crude oil -- have transited the Strait of Hormuz in the past 24 hours in coordination with the country's armed forces.
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The NYMEX WTI crude futures contract for July delivery dropped $4.70 to $88.19 bbl, after hitting an intraday high of $93.89 bbl. Meanwhile, the front-month ICE Brent fell $4.82 to $94.76 bbl.
Downstream, the NYMEX ULSD futures for June delivery fell $0.1107 to $3.6039 gallon, and front-month NYMEX RBOB futures slid $0.0741 to $3.1464 gallon.
In contrast, the U.S. Dollar Index rose 0.29 points to 99.13 against a basket of foreign currencies.
Tehran on Wednesday said that negotiations remained underway despite Tuesday's U.S. strikes, which Iran described as a breach of the ceasefire. U.S. Secretary of State Marco Rubio claimed that a peace deal was just days away. The comments fueled optimism about a gradual return of energy supply from the Middle East, weighing on prices.
Last week, however, Fatih Birol, director of the International Energy Agency (IEA), warned that commercial crude oil inventories could only cover a few more weeks of current refiner demand, and said that the global market could hit a "red zone" by July or August.
Global oil inventories have been declining at a record pace since the U.S.-Israeli war on Iran removed nearly one-fifth of the world's petroleum liquid supply from the market since early March.
Market participants were monitoring upcoming U.S. inventory reports from the American Petroleum Institute and Energy Information Administration scheduled to be released Wednesday and Thursday, due to the Memorial Day holiday.