Oil Prices Shrug Off Rafah Offensive, Ceasefire Rejection


   
    

   VIENNA (DTN) -- Oil futures closest to expiration on the New York Mercantile 
Exchange and Brent crude on the Intercontinental Exchange softened Tuesday 
morning, as the potential risk to physical oil supplies remained low despite 
Israel's rejection of Hamas' latest ceasefire proposal and the simultaneous 
start of the Israeli Defense Forces' offensive into Rafah.

   Slower-than-expected economic growth in OECD economies amplified louder 
growing demand concerns, which over the past few weeks displaced bullish 
sentiment fueled by OPEC+ production cuts and Mideast tensions. The markets see 
a high likelihood of the oil producer extending at least some of the output 
curbs into June and beyond. While no such consensus existed for outlooks on 
U.S. production growth at the beginning of the year, forecasting agencies' 
expectations have lately converged.

   The Energy Information Administration in last month's Short-term Energy 
Outlook pegged domestic crude oil production in the first quarter at 12.83 
million bpd, a slight downward revision from a month earlier. Overall, the EIA 
expected U.S. crude output to average 13.21 in 2024, up 280,000 bpd, or 2.2%, 
year-on-year, compared to an 8.6% growth rate in the 2022-2023 period. OPEC, 
which at the beginning of the year was much more upbeat about U.S. output 
growth, in their April report equally called for 2.2% year-on-year growth in 
U.S. liquids production. The push and pull of fewer but more efficient rigs on 
domestic crude output has yet to produce a clear winner. The EIA's May STEO is 
scheduled for release today at 12:00 PM ET, with both OPEC and IEA reports to 
follow next week.

   Near 8:00 AM ET, WTI for June delivery was down $0.28 to trade near $78.20, 
and Brent futures for July delivery slipped $0.29 to $83.04 bbl. RBOB for June 
delivery dropped $0.0245 to $2.5637 gallon, and ULSD for June delivery was 
trading near $2.4496 gallon, down $0.0118.

    

    

   Karim Bastati, karim.bastati@dtn.com, http://www.dtn.com.




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