WTI Below $90 as Mideast Back in Truce, China Demand Hurts


   
Barani Krishnan
DTN Refined Fuels Market Reporter

   SECAUCUS, NJ (DTN) -- Oil futures plunged Tuesday as Israel and Iran were 
back to their truce, returning the Middle East to a state of calm, even as U.S. 
President Donald Trump threatened avenging Tehran's shooting down of a U.S. 
military helicopter.

   Dismal economic indicators from top oil buyer China further weighed on 
global demand sentiment.

   NYMEX WTI crude for July delivery sank $3.10 to settle at $88.20 bbl. ICE 
Brent for August plummeted $2.80 to close at $91.45 bbl.

   Downstream, refined products mirrored the selloff in crude. On NYMEX, July 
ULSD dropped $0.0581 to settle at $3.5418 gallon, while July RBOB shed $0.0495 
to close at $3.0211 gallon.

   On the forex market, the US dollar index tumbled beneath the key 100-point 
level, with a 0.149-point slide to 99.875 against a basket of foreign 
currencies by 2:40 p.m. ET.

   Tuesday's 3% decline in crude erased Monday's 1% advance that had been 
sparked by a weekend exchange of missile strikes between Israel and Iran. Then, 
as the new week began, before both sides agreed to halt hostilities after a 
plea by Trump that diplomatic efforts be allowed to work to bring the 100-day 
war to a complete end.

   According to a media reports Tuesday, the president aides were negotiating 
with Tehran on four major elements of a nuclear agreement that U.S. officials 
contend would grind its uranium enrichment program to a halt for 15 years or so.

   The report added that the nuclear negotiations had gone considerably beyond 
discussion about reopening the Strait of Hormuz, the shipping lane where a 
fifth of global energy cargoes used to pass before Iran -- later the U.S. -- 
blockaded much of the waterway since early March.

   Despite such diplomatic efforts, Trump seemed perturbed by Monday night's 
downing by Iran of a U.S. helicopter over the Hormuz, saying the action 
required response.

   China's National Bureau of Statistics reported that crude imports hit an 
eight-year low in May, while refinery runs fell to levels not seen since 
COVID-19 lockdowns. The bearish demand signals were further reinforced by 
domestic Chinese retail fuel consumption data, which revealed that both 
gasoline and diesel sales slipped more than 5% year-on-year during May.

   Chinese refiners were forced to slash utilization rates and draw down 
commercial crude stockpiles, which have dwindled rapidly over the past two 
months due to a historic dearth of Middle Eastern deliveries.

   While dwindling worldwide oil inventories initially kept prices elevated, 
the International Energy Agency warned that stockpiles have plummeted to an 
eight-year low and could hit a critical "red zone" by late summer.

    




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