Morning Market Overview
New York Mercantile Exchange oil futures nearest to delivery and Intercontinental Exchange Brent futures shifted higher Thursday morning on reports that Iran seized a foreign oil tanker in the Persian Gulf, while concerns of oversupplied market following large builds in U.S. gasoline and distillate stocks capped the gains.
Near 9:00 AM ET, August West Texas Intermediate crude futures gained 23cts to $57.01 bbl while the September ICE Brent contract rose 36cts to $64.02 bbl. NYMEX August RBOB futures climbed 0.70cts to $1.8857 gallon and August ULSD futures traded 1.03cts higher at $1.9029 gallon.
According to reports, Iran’s Revolutionary Guard forces arrested a foreign oil tanker accused of smuggling oil with a crew of 12. The reports of seizure come just two days after an oil tanker based in the United Arab Emirates disappeared off trackers in Iranian territorial waters.
The vessel is accused of smuggling a million liters of fuel near Larak Island in the Persian Gulf. Following the reports, the Trump administration announced the deployment of 500 U.S. troops to Saudi Arabia to bolster the U.S. military presence in the region amid rising tensions with Iran. The latest flare-up in geopolitical tensions stoked inventors’ fears that Iran could disrupt traffic in the world’s busiest choke point for oil transit.
Aside from geopolitical tensions, oil futures continue to be weighed down by concerns of an oversupplied market after the Energy Information Administration reported domestic gasoline and distillate stocks increased by a bearish 9.1 million bbl in the second week of July.
EIA data released Wednesday also detailed a 3.1 million draw in U.S. commercial crude inventories, while the markets largely expected a drop above 4 million bbl in a wake of Hurricane Barry. “With the drop in crude stocks being less-than-expected and a surprise buildup in petroleum products stocks, the report started to weight on oil price” said ANZ analyst.
EIA data showed gasoline stocks increased for the first time in four weeks, lifting inventories to 2% above the five–year average. Distillate stocks extended higher for a third consecutive week, moving to a 12.3% year-over- year supply surplus though about 2% below the five-year average for this time of year.