Oil Down 2% as Demand Fears Eclipse Geopolitical Risk


   
Barani Krishnan
DTN Refined Fuels Market Reporter

   SECAUCUS, NJ (DTN) -- Crude futures fell 2% Thursday (7/9), reversing a 
chunk of the prior session's rally, as macroeconomic anxieties and demand 
destruction fears offset renewed military action in the Middle East and over 
the Strait of Hormuz.

   A day after energy prices surged to multi-week highs following the collapse 
of the U.S.-Iran ceasefire agreement, traders resorted to profit-taking, citing 
the partial return of supply stalled by months of prior fighting.

   Inventory data published on Wednesday (7/8) by the U.S. Energy Information 
Administration (EIA) disclosed the first weekly rise in commercial crude 
stockpiles in 11 weeks. Crude balances rose by 3 million bbl to 411.4 million 
bbl during the week ended July 3, the EIA reported.

   Cooling manufacturing margins in China and a hawkish monetary policy stance 
from the Federal Reserve added to concerns in a market already stressed by 
demand headwinds.

   Goldman Sachs noted that energy shipping traffic on the Hormuz had reached 
80% of normal flows by end of last week as tankers rushed to escape the 
previously blockaded chokepoint after the June 17 ceasefire between the U.S. 
and Iran. Both sides declared the pact over on Wednesday (7/8) as hostilities 
resumed.

   "Middle Eastern producers have started reopening their shut-in wells over 
the last month," a Goldman note to clients said.

   On the NYMEX, WTI for August delivery fell $1.97 to settle at $71.55 bbl, 
sliding 2% after Wednesday's 4.4% rise. The U.S. crude benchmark set an 
intraday low at $71.43 bbl, against a high at $75.13 that came in beneath the 
prior session's two-week high of $76.08.

   ICE Brent crude for September delivery dropped $1.72 to close at $76.30 bbl, 
posting a 2.2% decline versus the prior session's 5.2% rally. The global 
benchmark peaked at $79.25 bbl -- beneath Wednesday's $80.59 -- before selling 
pressure forced it to as low as $75.58.

   Downstream, NYMEX ULSD for August shed $0.0859 to finish at $3.5545 gallon. 
NYMEX RBOB gasoline for August slid $0.0647 to settle at $3.0387 gallon as 
domestic refined products joined the broader energy selloff.




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