Oil prices immediately fired about 2.5% higher Tuesday, but they've been metaphorically treading water since that initial move, with modest increases across the barrel.

Tensions between the U.S. and Iran are the primary motivation for reluctance among sellers Tuesday, although there is also a strong tradition of price hikes in the first third of any new year.

The U.S. launched attacks against Iranian backed militias and that came after some threats of disruptions in shipping in the Mediterranean. Late this morning, the Wall Street Journal reported that Iran had decided to triple its production rate for near-weapons-grade uranium, and that's a practice that could further deteriorate the relationship between the U.S. and the Islamic republic. There's a sense that the White House is seeing more reasons to tighten sanctions and thereby limit oil revenue from Iran.

Crude oil futures moved sharply higher on a day that was devoid of other news. February West Texas Intermediate rose $2.30 to $75.86 a barrel, while February Brent added $2.29 to $81.36/bbl.

Refined products trading was calm, but both diesel and gasoline added 4-5cts a gallon in the morning session. There is a history of first quarter rallies for RBOB futures and the January contract added 4.18cts to $2.1719/gal.

Diesel was strong, particularly when one considers that very few distillate molecules have gone to winter heating purposes. January futures were up 4.52cts at $2.7064/gal. There are no signs of a polar vortex as far as one can see into January, but diesel moved up thanks to the cost increases for crude.

Cash markets saw additions in all seven bulk markets. The strongest arena was Chicago where a cycle change lifted gasoline by nearly 15cts/gal. Most other markets added 4-7cts/gal.

Diesel moved up by 4-7cts/gal in most markets although Group 3 ULSD rose a modest 1-1.25cts/gal.

In the last week of 2023, markets are sporting modest deflation for diesel and jet fuel, with bulk gasoline prices almost identical to where they were a year ago. OPIS finds most diesel numbers to be around 14% lower than Boxing Day 2022 with jet fuel about 24% cheaper.

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

December 26, 2023 12:24 ET (17:24 GMT)