DTN Oil Update

Karim Bastati
DTN Analyst

VIENNA (DTN) -- Oil and product futures rose Thursday morning after U.S. and Iranian forces traded fresh attacks, threatening a shaky ceasefire amid ongoing negotiations to end the war that has caused the largest oil supply disruption in history and soaring energy prices.

By 7:45 a.m. EDT, ICE Brent for July delivery was up $2.77 to trade near $97.06 bbl, and NYMEX WTI for July delivery rose $2.65 to $91.33 bbl.

Downstream, NYMEX ULSD futures for June delivery advanced $0.055 to $3.6525 gallon, and front-month NYMEX RBOB futures rose $0.0621 to $3.1958 gallon.

The U.S. Dollar Index edged higher by 0.16 points to 99.31 against a basket of foreign currencies.

The U.S. overnight carried out new strikes on Iranian military sites. In response, Iran launched drone and missile attacks on a U.S. airbase in Kuwait. Oil futures rebounded, but the relatively tepid price reaction suggested the market expected the current ceasefire to largely hold and both sides to show constraint.

Oil prices slid this week on prospects of a peace deal which would allow flows through the Strait of Hormuz, blockaded for nearly three months, to gradually resume. On Wednesday, oil slumped in reaction to an Iranian state media report insinuating a reopening was imminent. The White House later denied the report about the alleged memorandum of understanding between Tehran and Washington, D.C.

Price movements have been mostly headline-driven over the past weeks as the fundamental reality of physical oil supply did not change. Global oil and fuel inventories continued to deplete at a rapid pace as refinery runs slumped to the lowest since the COVID pandemic amid the crude oil scarcity and soaring input costs.

International buyers have over the past month increasingly turned to the U.S. to fill the supply gap. U.S. exports of both crude oil and refined products have rocketed to unprecedented levels, drawing down inventories at a much faster than usual pace just as the U.S. is entering main demand season. The American Petroleum Institute on Wednesday reported that commercial crude oil inventories shrank for the fifth consecutive week. The 2.8 million bbl decline in the week ended May 22 would leave stocks 23.5 million bbl lower than just a month ago. Official government data from the U.S. Energy Information Administration is scheduled for 12 p.m. EDT release today, delayed by one day due to Monday's federal holiday.