Oil Rallies Amid Trump's Warning of Prolonged Iran War


   
Barani Krishnan
DTN Refined Fuels Market Reporter

   SECAUCUS, NJ (DTN) -- Oil and product futures hit multi-month highs Monday 
(3/2) as an escalating U.S.-Israel military campaign against Iran and Tehran's 
retaliatory strikes fueled fears of a wider Middle East contagion that could 
paralyze the Strait of Hormuz oil transit.

   The oil futures rally was capped by OPEC's announcement that it will raise 
output in April to mitigate lost supply. But the downside was also limited by 
U.S. President Donald Trump's remarks that the war could drag beyond the 
initial 4-5 projected weeks. "We have capability to go far longer than that; 
whatever it takes," he said.

   Some energy markets experienced their largest one-day price spike since 
Russia's invasion of Ukraine four years ago.  Crude futures soared 12% 
initially as U.S.-Israeli bombs pounded Iran, killing -- according to the White 
House -- some 48 senior Iranian leaders, including the country's Supreme Leader 
Ayatollah Ali Khamenei. Tehran retaliated with missiles aimed at neighboring 
Gulf capitals.

   The rally gained steam as maritime traffic through the Strait of Hormuz that 
straddles Iran effectively collapsed, leaving the world's most vital energy 
corridor at a de facto standstill. Approximately 20% of the global petroleum 
supply transits the narrow passage, which is now considered too high-risk for 
commercial tankers to navigate.

   OPEC+ members agreed Sunday (3/1) to increase April output by 206,000 bpd 
following a three-month production pause. This modest hike arrives as Saudi 
Arabia separately added 500,000 bpd to the market in anticipation of Mideast 
supply shocks. The move follows a massive 2.9 million bpd quota increase last 
year by core members to offset previous voluntary cuts.

   NYMEX WTI for April delivery surged to a nine-month high of $75.33 bbl 
before closing the official session at $71.23, up $4.21, or 6%, on the day.

   ICE Brent crude for May delivery hit a 14-month high of $82.37 before 
settling at $77.74, up $4.87, or 6.7%.

   Downstream, ULSD futures for April delivery rocketed to a 16-month high of $ 
3.0486 gallon before closing at $2.9004, up $0.5298.

   The gasoline contract for March surged to a nine-month high of $2.4955, 
before settling at $2.3706, up $0.2927.  

   The dollar's rally to a five-week high blunted energy price momentum by 
making greenback-denominated commodities costlier for foreign buyers. The U.S. 
dollar index rose 1.01 points to 98.575, hitting a peak of 98.725 not seen 
since January. Traders attributed the surge to a classic flight to quality as 
investors sought refuge in the security of U.S. assets.




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