Oil turned lower Monday, giving up earlier gains, as the market played down rhetoric between the U.S. and Iran that had boosted the potential for tighter global supplies.
Despite the rhetoric, U.S. and global benchmark prices failed to climb back to key levels, and expectations for further gains in production from OPEC and its allies and a potential slowdown in global crude demand put more pressure on oil.
“Questions about the potential for increased production from Saudi Arabia and Russia” had limited earlier gains, said Rob Haworth, senior investment strategist with U.S. Bank Wealth Management. “In our view prices are likely to remain rangebound, limited on the upside by likely production increases from [the Organization of the Petroleum Exporting Countries] and Russia.”
September Brent crude LCOU8, -0.52% traded 22 cents, or 0.3%, lower, at $72.85 a barrel on ICE Futures Europe, after tapping a high of $74.50. The global benchmark had marked a weekly loss of about 3% through Friday, logging its third straight weekly fall.
September West Texas Intermediate crude CLU8, -0.84% which became the front-month contract at Friday’s session close, shed 51 cents, or 0.8%, at $67.75 a barrel Monday. The intraday high of $69.31 came in well short of the August contract, which expired Friday at $70.46 a barrel, the highest level in a week. The August contract had suffered from a 0.8% weekly drop, which was also the third weekly decline in a row.
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Early Monday, President Donald Trump “provided a shot in the arm for prices to start the week, turning up the heat regarding tension with Iran once again,” Matt Smith, director of commodity research at ClipperData, told MarketWatch. “Iranian crude exports have dropped to a six-month low so far in July — a trend which will continue apace if the U.S. administration has its way.”
Trump on Sunday tweeted an all-caps message to his Iranian counterpart, Hassan Rouhani, warning that threats against the U.S. will be met with “consequences…few in history have suffered before.” The tweet appeared to refer to comments Rouhani had made warning against hard-line U.S. policies on Iran.
To Iranian President Rouhani: NEVER, EVER THREATEN THE UNITED STATES AGAIN OR YOU WILL SUFFER CONSEQUENCES THE LIKES OF WHICH FEW THROUGHOUT HISTORY HAVE EVER SUFFERED BEFORE. WE ARE NO LONGER A COUNTRY THAT WILL STAND FOR YOUR DEMENTED WORDS OF VIOLENCE & DEATH. BE CAUTIOUS!
— Donald J. Trump (@realDonaldTrump) July 23, 2018
