Oil Heads for Third Weekly Decline as Mideast Exports Jump


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- Oil futures were on track for their third consecutive weekly 
decline Friday (6/26) morning as oil exports from the Persian Gulf have soared 
following a U.S.-Iranian agreement which allowed for a reopening of the Strait 
of Hormuz.

   By 08:00am ET, ICE Brent for August delivery was down $2.17 to trade near 
$73.09 bbl, and NYMEX WTI for August delivery fell $1.81 to $70.11 bbl.

   Downstream, NYMEX ULSD futures for July delivery retreated $0.0650 to 
$3.2332 gallon, and front-month RBOB futures slid $0.0553 to $2.9720 gallon.

   The US dollar index softened by 0.14 points to 101.055 against a basket of 
foreign currencies.

   The selloff came as oil flows through the strait jumped to around three 
quarters of pre-war levels and amid growing confidence the choke point will 
remain freely traversable. An Iranian attack on a cargo ship on Thursday 
briefly tested the current ceasefire, but both Washington and Tehran were quick 
to announce their intention to keep the waterway open.

   The scale of outbound flows, estimated to have averaged 12 to 15 million bpd 
over the last three days, fueled bearish market sentiment. This export pace, 
however, is unlikely to be sustained over the coming weeks, as the initial wave 
of oil passing the strait consisted of tankers that have been stranded in the 
Persian Gulf for months. Many producers in the region have restarted cargo 
loadings over the past few days, but inbound traffic of empty tankers remained 
at a fraction of pre-war levels.

   While crude futures have shed almost all of their wartime gains, refined 
product futures continued to trade considerably above prices on February 27. 
The reopening of the Strait of Hormuz freed up crude supplies, but the 
three-month long lull in global fuels production resulting from the limited 
availability of crude oil and high prices will take longer to end as refiners 
start to ramp up operations amid a restoration of supply chains.

    




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