DTN Oil Update

Karim Bastati
DTN Analyst

VIENNA (DTN) -- Oil futures rose for the third consecutive trading day Wednesday morning on growing supply risks after the U.S. launched fresh strikes on Iran and reimposed its blockade of Iranian ports.

By 08:01 a.m. ET, ICE Brent for September delivery was up $0.33 to trade near $85.06 bbl, and NYMEX WTI for August delivery rose $0.33 to $79.67 bbl.

Downstream, NYMEX ULSD futures for August delivery softened $0.0168 to $3.9975 gallon, while front-month RBOB futures advanced $0.0279 to $3.2552 gallon.

The U.S. Dollar Index inched higher by 0.064 points to 100.775 against a basket of foreign currencies.

Flows through the Strait of Hormuz have over the past week slowed markedly amid Iranian attacks on tankers and the collapse of the ceasefire. In addition, the renewed U.S. blockade threatened to further tighten oil supply. Iranian crude oil exports averaged around 1.5 to 2 million bpd after the U.S. lifted its embargo and suspended sanctions.

Emerging signs highlighting a deeper-than-expected impact of the supply disruption induced global demand destruction, meanwhile, capped gains. Data from China's National Bureau of Statistics published overnight showed refiner crude inputs extending their decline into June to the lowest level since March 2020, down 18% year-on-year. Crude oil imports in June dropped to 7.1 million bpd, marking the slowest pace in nearly a decade.

A refined product export ban instated in the early days of the Hormuz crisis exacerbated the Chinese crude demand lull. Domestic fuel demand, which was already struggling amid the country's rapid energy transition, dropped in reaction to surging prices. The new data suggests that some of this demand destruction is likely permanent.

Near-record-high margins, meanwhile, had U.S. refiners run close to maximum capacity, and seasonally rising domestic demand and high exports continued to draw down inventories. The American Petroleum Institute (API) late Tuesday reported the 12th consecutive weekly decline in domestic crude oil inventories, or the 11th in twelve weeks according to U.S. Energy Information Administration (EIA) data. API data also showed nationwide gasoline stockpiles, which have dwindled to a 14-year seasonal low, dropping by another 1.66 million bbl last week. Official EIA data is scheduled for release at 10:30 a.m. ET Wednesday.