Oil Prices Rise as US Dollar Slumps, ULSD Rally Cools

Oil prices extended their rally on Tuesday, Jan. 27, morning as a plummeting dollar drove energy markets broadly higher, while the impact from the weekend's massive Winter Storm Fern fizzled. President Donald Trump's renewed threat to Iran of U.S. warships having arrived in the Middle East added to the geopolitical risks in energy supplies.

The Dollar Index plunged to a four-month low of 96.365 against a basket of currencies ahead of the Federal Reserve's decision on U.S. interest rates, due after a two-day policy meeting that ends Wednesday, Jan. 28. Notwithstanding speculation that the Fed might opt for a rate cut, the central bank is expected to keep rates unchanged in a range of between 3.5%-3.75%.

WTI futures for March delivery rose $0.70 to $61.33 bbl, and ICE Brent for March delivery advanced $0.63 to $66.20 bbl.

Downstream, NYMEX RBOB futures for February delivery edged up $0.0106 to $1.8307 gallon.

Front month ULSD futures, meanwhile, bucked the uptrend, retreating from Monday's two-month high after the worst of the Winter Storm Fern had passed. ULSD for February delivery was down $0.0299 to $2.5381 gallon.

In the U.S., freezing temperatures over the weekend forced shut some natural gas and crude oil production, and disrupted operations at Gulf Coast refineries. The bullish effect of these supply outages was mitigated by Kazakh crude oil loadings returning to full capacity and the restart of operations at the country's largest oilfield.