Oil Prices Rebound on U.S.-Iran Peace Talk Roadblock


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- Oil futures rebounded Thursday (5/21) morning on reports 
that Iran's supreme leader had issued a directive ordering that the country's 
enriched uranium should not be sent abroad. Storing the fissile material 
outside of the country has been a key U.S. demand in peace negotiations.

   At 07:50am ET, ICE Brent for July delivery was up $1.77 to trade near 
$106.79 bbl, rebounding from an intra-day low of $103.68 bbl. NYMEX WTI for 
July delivery rose $2.20 to $100.46 bbl.

   Downstream, NYMEX ULSD futures for June delivery advanced $0.0279 to $3.975 
gallon, and front-month NYMEX RBOB futures edged higher by $0.0026 to $3.49 
gallon. 

   The US dollar index strengthened by 0.18 points to 99.195 against a basket 
of foreign currencies.

   Oil prices have over the last two trading days softened after statements 
from Washington and Tehran raised hopes of progress in negotiations to end the 
war against Iran, which has disrupted a fifth of global oil supply since early 
March. Khamenei's directive came after days of both sides signaling a 
willingness to compromise on key issues, and cast doubt over U.S. President 
Donald Trump's assessment that peace negotiations were "in the final stages". 
Prices clawed back a portion of recent losses, but remained well below Monday's 
nearly two-week highs.

   Bearish economic data from the euro zone, meanwhile, weighed on prices. S&P 
Global's Purchasing Manager Index for May showed economic activity in the 
region contracting at the fastest pace in two and a half years amid the ongoing 
energy supply crisis, with the PMI dropping to 47.5 points, the second 
consecutive sub-50 reading. Inflationary pressures and logistical constraints 
caused by the largest oil supply disruption in history, now in its twelfth 
week, led major forecasting agencies to prognosticate global oil demand this 
year to shrink for the first time since the pandemic.

   Global inventories continued to dwindle at an unprecedented pace. U.S. 
Energy Information Administration data published Wednesday revealed the largest 
weekly decline in domestic crude oil inventories on record, with stockpiles in 
the strategic petroleum reserve and in commercial tanks falling by a combined 
17.8 million bpd. International demand for U.S. crude, up 50% from year-ago 
levels, was the main driver of the unusually fast pace of inventory draws. Over 
the past four weeks, commercial crude oil stocks on average shrank by 740,000 
bpd, a rate normally confined to the summer months when domestic refining 
activity is at its peak.

   Fatih Birol, the head of the International Energy Agency, on Thursday again 
warned of shortage risks given that the world was entering main summer demand 
season with crude inventories at multi-year lows and no signs of a slowdown in 
global stock draws, saying that the global market could enter a "red zone" in 
July or August.




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