Oil on Track for Weekly Decline As Risk Premium Softens


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- Oil prices were mixed Friday (8/28) morning, with crude 
benchmarks eyeing weekly declines in the 4% to 5% range, reflecting a shrinking 
geopolitical risk premium tied to the U.S-Iran war and rising oil flows from 
the Middle East.

   By 08:35am ET, ICE Brent for October delivery was down $0.42 to trade near 
$89.28 bbl, and NYMEX WTI for October delivery fell $0.79 to $82.74 bbl.

   Downstream, NYMEX ULSD for September delivery advanced $0.0174 to $4.2691 
gallon, and front-month RBOB futures rose $0.0407 to $3.4249 gallon.

   The US dollar index edged higher by 0.053 points to 99.145 against a basket 
of foreign currencies.

   The U.S. completed its strategic pivot from a military pressure campaign to 
an economic one this week when Treasury Secretary Scott Bessent on Monday 
announced new sanctions on Iran. A muted response from Tehran, and the lack of 
anticipated secondary sanctions on Iranian trading partners, weighed on prices.

   Signs of some crude flows circumventing Iran's blockade of the Strait of 
Hormuz, and productive negotiations between Iran and Oman to establish a joint 
shipping corridor in the Strait of Hormuz, also eased supply woes. Officials 
from both countries this week said that this shipping lane could start within 
the next 30 to 60 days.

   Ship tracking experts did record a pickup in oil exports, with shippers 
relying on a combination of dark voyages in a U.S.-Navy protected corridor 
along the Omani coast, and crude flow diversions via pipelines and ship-to-ship 
transfers. Estimates vary however, ranging from one third to two thirds of 
pre-war volumes.

   While crude futures moved lower, product futures shrugged off the increase 
in oil flows from the Persian Gulf amid tightening global fuels supply. War 
damages to refineries in the Middle East and Russia have taken offline a not 
insignificant chunk of global fuels production capacity. Over the past several 
months, intensifying Ukrainian attacks on energy infrastructure have impacted a 
cumulative 20 to 40% of Russian refining capacity.  On Friday, Ukraine reported 
to have struck yet another Russian refinery overnight.




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