Oil Rises as War Risk Premium Outweighs Supply Recovery


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- Oil prices advanced Wednesday (9/30) morning and were on 
track for the third consecutive monthly increase, driven by tight global fuels 
supply and stalling U.S.-Iranian negotiations.

   By 08:45am ET, ICE Brent for November delivery was up $0.53 to trade near 
$103.12 bbl on its last trading day, while the December contract advanced $1.69 
to $97.85 bbl. NYMEX WTI for November delivery rose $1.23 to $90.61 bbl.

   Downstream, NYMEX ULSD for October delivery jumped $0.2454 to $5.1433 
gallon, and front-month RBOB futures gained $0.0618 to $3.34 gallon.

   The US dollar index softened by 0.33 points to 100.785 against a basket of 
foreign currencies.

   Prices seemingly shrugged off the resurgence in crude oil exports from the 
Middle East, which analysts estimate have over the past week clocked in at 
75-90% of ante bellum levels. Risks to these streams remained unchanged, 
however, as Tehran issued new threats amid stalling negotiations with the U.S. 
What's more, the surge in crude oil supply has so far done little to alleviate 
an ongoing global fuels supply dearth that had just recently pushed European 
and U.S. diesel prices to record highs.

   In contrast to Middle Eastern crude oil flows, refined product supply 
continued to be severely stifled. Damages to refineries from the Persian Gulf 
to Russia have capped global fuels production, and the overwhelming majority of 
product flows from the region still have to traverse the Strait of Hormuz given 
limited alternatives.

   The eight month long global oil and product supply deficit has resulted in 
dwindling inventories. In the U.S., releases from the Strategic Petroleum 
Reserve have feathered declines in commercial crude stocks, an option 
unavailable for fuel inventories. The U.S. Energy Information Administration 
(EIA) on Monday said that crude oil volumes in strategic storage fell by 
700,000 bbl last week, followed by the American Petroleum Institute (API) on 
Tuesday reporting a 1 million bbl expansion in commercial inventories. API 
estimated gasoline stockpiles to have grown by nearly 3 million bbl last week, 
but said that distillate fuel oil inventories continued to shrink. If confirmed 
by EIA data scheduled for 10:30am ET release today, API's estimated 286,000 bbl 
draw would widen the distillate inventory gap to year-ago levels to more than 
13%. 

    

    




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