Oil Extends Decline As More Tankers Return to Persian Gulf


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- Crude oil futures extended their decline Wednesday (7/1) as 
traffic through the Strait of Hormuz picked up amid signs that indirect 
negotiations between the U.S. and Iran were progressing.

   By 08:25am ET, ICE Brent for August delivery was down $0.94 to trade near 
$72.01 bbl, and NYMEX WTI for August delivery fell $0.69 to $68.81 bbl.

   Downstream, NYMEX ULSD futures for August delivery advanced $0.0643 to 
$3.2934 gallon, and front-month RBOB futures edged higher $0.0159 to $2.9108 
gallon.

   The US dollar index strengthened by 0.233 points to 101.19 against a basket 
of foreign currencies.

   Ship tracking data revealed that traffic through the Strait of Hormuz on 
Tuesday increased for the first time since last week's Iranian attacks on two 
vessels. Inbound traffic into the Persian Gulf ticked markedly higher, showing 
shipper's growing confidence that the chokepoint will remain safely traversable.

   White House envoys arrived in Qatar on Tuesday to resume technical talks, 
the first stage on the road to a permanent peace deal. The negotiations, 
however, took place with Qatari mediators rather than representatives from 
Tehran. Markets have largely been kept in the dark over the outcome of these 
latest negotiations, but several media outlets reported that technical talks 
were progressing, citing an anonymous U.S. source.

   Meanwhile, markets are expecting OPEC to raise production quotas for August 
at their monthly meeting scheduled for Sunday. Since the closure of the Strait 
of Hormuz in early March forced shut production in the region, however, changes 
to the group's output targets have had no impact on actual oil supply. 
Producers who rely heavily on the Persian Gulf for exports have been ramping up 
operations since the reopening of the waterway, but so far, only Iranian oil 
flows have closed in on pre-war levels.

   It will likely take weeks before inventories will feel reprieve from the 
supply resurgence. Commercial crude oil stocks in the U.S. have been depleting 
rapidly amid record high exports, and the American Petroleum Institute on 
Tuesday estimated that nationwide stockpiles have shrunk by another 6.1 million 
bbl last week. If confirmed by U.S. Energy Information Administration data 
scheduled for 10:30am ET release today, the tenth consecutive weekly draw would 
leave commercial inventories at a seven-and-a-half low 406 million bbl.




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