Oil Futures Fall 4% as Trump Winds Down U.S.-Iran Tensions


   
Barani Krishnan
DTN Refined Fuels Market Reporter

   SECAUCUS, NJ (DTN) -- Crude futures tumbled by more than 4% Thursday (1/15) 
after a wind-down in U.S.-Iran tensions snapped a five-day rally in oil. 
Concerns that inventories of U.S. crude and gasoline could pile up amid 
seasonally weak winter demand for fuels also weighed.

   "It's back to the drawing board on supplies, only this time the focus is on 
the likelihood that we have more supply than we need, and that prices need to 
correct after going up too much, too fast," said John Kilduff, partner at New 
York energy hedge fund Again Capital.

   In the span of a week between last Wednesday (1/7) and yesterday (1/14), 
crude prices jumped almost 9%, hitting three-month highs, as anti-government 
demonstrations in Iran sparked concerns about the future of crude supplies from 
a country ranked OPEC's fourth largest producer, with an output of 3.2 million 
bpd.

   Heightening the tensions were U.S. President Donald Trump's urging that the 
protests in Iran continue, while he hinted at the same of airstrikes against 
the regime in Tehran if civilian deaths mounted.

   But Trump suddenly switched course yesterday afternoon, saying he had been 
informed that the situation in Iran was improving. That led to a dramatic 
pullback in crude prices.

   Supply risks also abated amid reports that Venezuela had begun to restart 
some of its crude production forcibly shut by U.S. sanctions. The development 
came after secondary sources polled by OPEC reported Venezuelan output in 
December at below the 900,000-bpd mark for the first time since May.

   Surging U.S. inventories had put the market on a backfoot too. U.S. Energy 
Information Administration data Wednesday showed gasoline up 9 million bbl in 
the week ending January 9, and commercial crude oil inventories growing 3.4 
million bbl - propelling stocks 3.1% and 2.4% above year-ago levels, 
respectively.

   NYMEX WTI futures contract for February delivery settled down $2.83, or 
4.6%, at $59.19 bbl. ICE Brent for March delivery closed down $2.76, or 4.2%, 
at $63.76 bbl.

   Front-month NYMEX ULSD futures contract slid $0.0792 to $2.2027 gallon, and 
RBOB futures contract for February delivery retreated $0.0529 to $1.8076 gallon.

   The U.S. Dollar Index rose 0.213 points to 99.12 against a basket of foreign 
currencies.




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