Petroleum futures were dropping sharply at midday Monday after crude oil benchmarks briefly hit two-month highs.
The gains occurred Sunday night in the wake of a drone strike in Jordan that killed three U.S. troops and wounded dozens more. The U.S. military hinted that it might soon stage strikes against militias in Iraq and Syria, with some Republican lawmakers even exhorting military action on Iranian soil.
Sunday night, the post-drone action saw March West Texas Intermediate move as high as $79.29/bbl, which briefly reflected a $1.18/bbl gain. Similarly, March Brent got as high as $84.80/bbl, amounting to a gain of $1.25/bbl.
Those numbers represented the highest levels since November, but some aggressive selling surfaced Monday morning. By midday, March WTI was off $1.18/bbl at $76.82/bbl while March Brent was off $1.13/bbl to $82.42/bbl.
February typically is hospitable to crude oil increases, but traders have demonstrated that they are not willing to chase prices higher unless there is clear evidence of impeded supply. Drone strikes on export terminals in Russia are deemed more likely to inspire crude buying, but news was quiet on that front to start the week.
Diesel supply from Russia was impacted by drone-inspired damage last week and the loss of export barrels has galvanized diesel trading. ULSD futures were off but the 1.58ct/gal drop to $2.8276/gal for February contracts reflects a widening distillate crack. Gulf Coast diesel, for example, fetches a robust $36.79/bbl crack versus WTI futures.
Gasoline lost more considerable ground. Refinery output is constrained by winter weather and first-quarter turnarounds, but demand is construed to be barely 8 million b/d or so. February RBOB futures fell 5.39cts/gal to $2.2402/gal with smaller losses in other winter and spring months. Cash markets were generally down 4-5cts/gal with the notable exception of Southern California, which rose by more than 4cts/gal.
Retail gasoline has consolidated at about $3.10/gal nationally which amounts to about 40cts/gal of disinflation relative to 2023. February and March 2023 produced a considerable advance at the pump, so the gap between years could potentially expand to 50cts/gal or more.
This content was created by Oil Price Information Service, which is operated by Dow Jones & Co. OPIS is run independently from Dow Jones Newswires and The Wall Street Journal.
--Reporting by Tom Kloza, tkloza@opisnet.com; Editing by Michael Kelly, mkelly@opisnet.com
(END) Dow Jones Newswires
01-29-24 1241ET
