Oil Jumps after Trump Rejects Truce Offer, Mulls Strikes


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- Oil prices jumped Monday (9/28) morning after U.S. President 
Donald Trump over the weekend rejected an Iranian peace proposal amid reports 
he was considering new military strikes on the country.

   By 08:35am ET, ICE Brent for November delivery was up $2.51 to trade near 
$106.83 bbl, and NYMEX WTI for November delivery rose $2.4 to $94.81 bbl.

   Downstream, NYMEX ULSD for October delivery advanced $0.1771 to $4.8618 
gallon, and front-month RBOB futures edged higher $0.0137 to $3.4071 gallon.

   The US dollar index strengthened by 0.14 points to 100.85 against a basket 
of foreign currencies.

   The proposal submitted by Tehran last week was reportedly similar to the 
memorandum of understanding signed by both sides in June, with Iran offering to 
lift its blockade of the Strait of Hormuz in return for an end to the U.S. 
blockade of Iranian ports. Iranian oil exports, a significant revenue source 
for Tehran, have since the reinstatement of the U.S. naval embargo in July 
collapsed.

   The rejection stoked concerns over the oil supply disruption dragging into 
November. The Wall Street Journal on the weekend reported that Trump told aides 
he was considering relaunching bombing campaigns after the midterms, while 
publicly communicating to be seeking a diplomatic resolution following the 
November elections.

   The possibility of a U.S. diesel export ban, meanwhile, continued to weigh 
on U.S. crude prices, driving the Brent-WTI spread above the $12 bbl mark in 
early Monday morning trade, its highest since the end of March. A ban on diesel 
exports would likely result in U.S. refiners reducing processing rates, 
lowering domestic crude oil demand.

   Middle Eastern crude oil exports have this month rebounded to their highest 
since the start of the war in late February, yet signs of near-term physical 
supply tightness persisted despite reports of easing disruptions. Brent's 
forward curve has considerably steepened over the past four weeks, with 
backwardation being most pronounced on the front-end of the curve. On Monday, 
Brent's prompt spread soared past $7 bbl for the first time since May 1, albeit 
partly propelled by a rally in the November contract on its penultimate trading 
day.




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