Brent Slumps Below $100/BBL on Signs of U.S.-Iran Deal


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- Crude oil futures plummeted by as much as 12% Wednesday 
(5/6) morning, hitting to two-week lows on signs of an imminent diplomatic 
resolution to the U.S.-Iran war which has been disrupting a fifth of global oil 
supply for more than two months.

   Near 07:40 am ET, ICE Brent for July delivery fell $11.79 to $98.08 bbl, and 
NYMEX WTI for June delivery slid $11.85 to $90.42 bbl.

   Downstream, NYMEX ULSD futures for June delivery fell by $0.4121 to $3.6181 
gallon, and front-month NYMEX RBOB futures retreated $0.2992 to $3.3214 gallon. 

   The US dollar index slumped to its lowest since the start of the war, 
shedding 0.735 points to 97.575 against a basket of foreign currencies.

   U.S. President Donald Trump on Tuesday paused military attempts to break the 
Iranian blockade of the Strait of Hormuz and guide stranded vessels through the 
waterway after only one day, citing progress in negotiations. He said that he 
halted "Project Freedom" for a short period of time at Pakistan's request to 
see if an agreement can be reached and signed. Islamabad has been a key 
mediator between the warring parties and helped negotiate the ceasefire enacted 
last month. Oil prices, which rose on Monday as U.S.-Iranian naval skirmishes 
raised concerns about the ceasefire holding, slid in reaction to the 
announcement.

   Prices extended their decline early Wednesday on reports that Washington and 
Tehran were close to an agreement to end the war. The U.S. reportedly expects 
an answer to the one-page memo, which involves Iran halting nuclear enrichment 
and both sides lifting their blockade of the Strait of Hormuz, within the next 
48 hours.

   Yet, prices remained well above their lowest point reached since the start 
of the conflict and were still some 40% above pre-war levels. While 
geopolitical risks have cooled, the disruption in physical oil supply, which 
will likely take months to recover once restrictions are lifted, for now 
remains unchanged.

   The largest oil supply disruption in history has led to a rapid drawdown of 
global inventories, including in the U.S., where petroleum exports soared to 
new record highs. The American Petroleum Institute on Tuesday reported that 
domestic stockpiles continued to shrink last week. According to the API, 
commercial crude inventories receded by 8.41 million bbl in the week ending May 
1, and gasoline and distillate fuel oil stocks fell by 6.1 million bbl and 4.6 
million bbl, respectively. Official inventory data from the U.S. Energy 
Information Administration is scheduled for 10:30am ET release today.




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