Oil Dips as Trade Shrugs Off U.S. Sanctions Threat on Iran


   
Barani Krishnan
DTN Refined Fuels Market Reporter

   SECAUCUS, NJ (DTN) -- Crude futures extended losses Tuesday (8/25) as 
fortified U.S. sanctions against Iran did little to lift market sentiment.  
Joint diplomatic efforts by Oman and Tehran to reopen the Strait of Hormuz also 
offset the threat of Washington's efforts to isolate Iran economically.

   NYMEX WTI crude for October delivery fell $2.65, or 3.12%, to settle at 
$82.36 bbl.  Brent crude futures settled down $3.59, or 3.9%, at $88.58 bbl.

   Downstream, NYMEX ULSD for September delivery eased $0.0239, or 0.56%, to 
close at $4.2438 gallon. NYMEX RBOB for September retreated $0.0179, or 0.55%, 
to finish at $3.2529 gallon.

   By 3:11 p.m. ET, the U.S. dollar index slid 0.104 points to 98.825 against a 
basket of currencies.

   The Trump administration's pivot from military escalation towards an 
enhanced sanctions strategy aimed at Iran chipped away at the geopolitical risk 
premium that had built in recent weeks.

   Washington had labeled its strategy an "economic D-day" for Iran, but market 
participants were unimpressed after the maneuver spared China, Iran's largest 
oil buyer, from secondary sanctions. The narrower-than-expected package 
reassured energy markets that primary Asian trade flows would remain unhindered.

   Coordinated diplomatic momentum between Muscat and Tehran further cooled 
supply disruption fears. A joint statement released Tuesday by the Omani and 
Iranian Foreign Ministers outlined a phased framework to establish a joint 
temporary shipping lane and execute a collaborative demining operation through 
the chokepoint.

   U.S. President Donald Trump announced that major transit channels in the 
Strait of Hormuz have been demined. But without confirmation from other 
independent parties, shippers were likely to remain cautious about returning to 
the waterway, market participants said. Ship tracking firms estimated daily 
transit on the Hormuz at roughly 5 million bpd compared to official U.S. 
estimates of 9 million bpd. Prior to the war that began in March, some 20 
million bpd of petroleum liquids transited the waterway.

   Downstream fuel markets remain underpinned by tight domestic road fuel 
inventories stemming from the six-month supply crunch. The American Petroleum 
Institute is scheduled to release at 4:30 p.m. ET Tuesday U.S. energy inventory 
data for the week ended August 21.




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