DTN Oil Update
WTI Below $90 as Mideast Back in Truce, China Demand Hurts
SECAUCUS, N.J. (DTN) -- Oil futures plunged Tuesday as Israel and Iran were back to their truce, returning the Middle East to a state of calm, even as U.S. President Donald Trump threatened avenging Tehran's shooting down of a U.S. military helicopter.
Dismal economic indicators from top oil buyer China further weighed on global demand sentiment.
NYMEX WTI crude for July delivery sank $3.10 to settle at $88.20 bbl. ICE Brent for August plummeted $2.80 to close at $91.45 bbl.
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Downstream, refined products mirrored the selloff in crude. On NYMEX, July ULSD dropped $0.0581 to settle at $3.5418 gallon, while July RBOB shed $0.0495 to close at $3.0211 gallon.
On the forex market, the U.S. Dollar Index tumbled beneath the key 100-point level, with a 0.149-point slide to 99.875 against a basket of foreign currencies by 2:40 p.m. ET.
Tuesday's 3% decline in crude erased Monday's 1% advance that had been sparked by a weekend exchange of missile strikes between Israel and Iran. Then, as the new week began, before both sides agreed to halt hostilities after a plea by Trump that diplomatic efforts be allowed to work to bring the 100-day war to a complete end.
According to a media reports Tuesday, the president aides were negotiating with Tehran on four major elements of a nuclear agreement that U.S. officials contend would grind its uranium enrichment program to a halt for 15 years or so.
The report added that the nuclear negotiations had gone considerably beyond discussion about reopening the Strait of Hormuz, the shipping lane where a fifth of global energy cargoes used to pass before Iran -- later the U.S. -- blockaded much of the waterway since early March.
Despite such diplomatic efforts, Trump seemed perturbed by Monday night's downing by Iran of a U.S. helicopter over the Hormuz, saying the action required response.
China's National Bureau of Statistics reported that crude imports hit an eight-year low in May, while refinery runs fell to levels not seen since COVID-19 lockdowns. The bearish demand signals were further reinforced by domestic Chinese retail fuel consumption data, which revealed that both gasoline and diesel sales slipped more than 5% year-on-year during May.
Chinese refiners were forced to slash utilization rates and draw down commercial crude stockpiles, which have dwindled rapidly over the past two months due to a historic dearth of Middle Eastern deliveries.
While dwindling worldwide oil inventories initially kept prices elevated, the International Energy Agency warned that stockpiles have plummeted to an eight-year low and could hit a critical "red zone" by late summer.