Oil Slides but on Track for Largest Weekly Jump Since July


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- Oil futures retreated Friday (9/11) morning but remained on 
track for the largest weekly gain in seven weeks on elevated supply risks 
caused by the flare-up in fighting in the Middle East.

   By 09:30am ET, ICE Brent for November delivery was down $3.67 to trade near 
$103.96 bbl, and NYMEX WTI for October delivery fell $3.71 to $98.77 bbl.

   Downstream, NYMEX ULSD for October delivery edged lower by $0.0094 to 
$5.0481 gallon, and front-month RBOB futures retreated $0.0642 to $3.3290 
gallon.

   The US dollar index edged higher by 0.023 points to 99.07 against a basket 
of foreign currencies.

   Reports that Iran was in negotiations with Gulf states to establish a 
jointly managed shipping route through the Strait of Hormuz weighed on prices. 
At the same time, however, physical oil supply disruptions and risks to flows 
have continued to grow. Ship tracking data showed that daily transits of the 
oil chokepoint fell back into the single digits on Thursday. In Yemen, 
Tehran-allied Houthis captured a port and island at Bab al-Mandeb, the waterway 
connecting the Red Sea to the Indian Ocean, putting future Saudi oil exports at 
greater jeopardy. The group on Thursday also launched fresh attacks on Saudi 
Arabia, including on areas traversed by the country's East-West pipeline that 
reroutes crude oil away from the Persian Gulf.

   The outsized impact on diesel of the now more than six-month long supply 
disruption was evident in recent price developments. Despite crude benchmarks 
retreating around 3% in early morning trade, ULSD for October delivery remained 
flat. On Thursday, the contract surpassed the $5 gallon mark for the first time 
since the Russia-Ukraine war induced rally of 2022. Diesel prices in the U.S. 
just last week surged to new record highs, and early data indicated that the 
national average at the pump was on the verge of surpassing the $6 gallon mark 
amid a tightening global market.

   The International Energy Agency (IEA), meanwhile, now sees even steeper 
demand destruction this year. In its latest monthly oil report published today, 
the Paris-based energy watchdog revised its 2026 demand growth forecast from a 
1.6 million bpd to a 2.5 million bpd decline. The conflict dragging on for 
longer than anticipated, however, had an even bigger impact on the supply side, 
with the IEA raising their supply deficit estimate for this year from 1.27 
million bpd to 1.74 million bpd.

    




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