Oil Tumbles on Red Sea Flows; Diesel Reverses Higher


   
Barani Krishnan
DTN Refined Fuels Market Reporter

   SECAUCUS, NJ (DTN) -- Crude oil futures tumbled about 3% Tuesday (9/29), 
weighed by recovering Middle Eastern supply and a stronger dollar, while 
reversed early weakness to end higher on growing anxiety over the global 
deficit in diesel and other transportation fuels.

   NYMEX WTI crude for November delivery lost $3.22, or 3.48%, settling at 
$89.38 bbl after an intraday low of $89.06.

   ICE Brent crude for November delivery moved down $2.69, or 2.6%, to settle 
at $102.59 bbl. The session low was $102.33. 

   Downward pressure on WTI and Brent deepened on reports that Saudi Aramco had 
partially restored operations along its East-West pipeline, allowing crude 
exports from the Red Sea hub of Yanbu to resume after a two-week disruption. 

   Expanded ship-to-ship shuttling in the Gulf of Oman and increased vessel 
traffic in the Strait of Hormuz reported by tanker trackers suggested that 
Middle Eastern crude export flows were also the mend despite the U.S.-Iran war 
headed for its eight month.

   Despite the pickup in crude flows, the White House's rejection of Iran's 
truce proposal amid U.S. President Donald Trump's threat to strike Iran again 
curtailed some of the long liquidation in NYMEX crude.

   Defying the weakness in crude, downstream distillates staged a sharp 
afternoon rally led by front-month position squaring ahead of Wednesday's 
(9/30) contract expiration. 

   NYMEX ULSD for October delivery climbed $0.1426, or 3.00%, to finish at 
$4.8979 gallon. It peaked at $4.9150 after a session low at $4.6050. 

   But RBOB for October reflected the broader market, retreating $0.0595, or 
1.78%, to close at $3.2782 gallon. The intraday low was $3.2328. 

   The dollar's rally has also been a significant offset to oil bulls. By 2:24 
p.m. ET, the U.S. dollar index gained 0.224 points to 101.150 against a basket 
of currencies.

   Market participants are focused next on weekly inventory reports from the 
American Petroleum Institute, due at 4:30 p.m. ET -- ahead of official supply 
numbers due from the U.S. Energy Information Administration at 10:30 a.m. ET on 
Wednesday (9/30). Traders are expecting a drawdown of 1.9 million bbl in U.S. 
crude stocks for the week ended September 25, versus the prior week's build of 
3.0 million bbl.

    




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