Oil settled 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, expectations for further gains in production from OPEC and its allies and a potential slowdown in global crude demand put more pressure on oil.
“There’s a lot of uncertainty in oil right now, which can cause some of the ups or downs to quickly change the market direction, especially after Iran drew Trump’s ire over the weekend,” Patrick DeHaan, head of petroleum analysis at GasBuddy, told MarketWatch. “Uncertainty brought some buyers to the table this morning but overall, it was lipstick on a pig.”
September Brent crude LCOU8, -0.15% settled a penny lower at $73.06 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, -0.69% on its first full session as a front-month contract, shed 37 cents, or 0.5%, to settle at $67.89 a barrel Monday. The August contract expired Friday at $70.46 a barrel, the highest level in a week, but it still suffered from a 0.8% weekly drop.
Read: Oil prices could top $120 before year-end
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 a 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.
“Until the response by President Trump the Iranian comments were dominating the price,” said James Williams, energy economist at WTRG Economics. “The reality is that Iran can not risk carrying out the threat and President Trump’s message just reminded traders that it is extremely unlikely Iran will do anything but threaten.”
Trump in May withdrew the U.S. from a 2015 international agreement to curb Iran’s nuclear program, setting the stage for the reimposition of economic sanctions that are expected to hinder Iran’s oil industry. Analysts have estimated up to 1 million barrels a day out of Iran’s more than 2.5 million barrels a day of crude exports could be at risk.
News of a 24-hour oil workers’ strike, which shut down output at Total’s North Sea platforms, had also supported oil prices Monday. A series of 24-hour and 12-hour stoppages are planned in the coming weeks, according to S&P Global Platts.
Meanwhile, oil prices have been tempered by rising supply from the Organization of the Petroleum Exporting Countries — led by Saudi Arabia — and producing allies like Russia following a decision in late June to begin ramping up output after more than a year of holding back production.
“Questions about the potential for increased production from Saudi Arabia and Russia” had limited earlier oil 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 OPEC and Russia.”
Market concerns over the U.S.-China trade dispute continue to contribute pressure on oil prices, with the Group of 20 leading nations, at a summit in Argentina, warning of the impact of a trade war on the global economy, said Mihir Kapadia, chief executive officer of Sun Global Investments. “The growing trade conflict has already raised concerns within the oil markets of decreased demand, and the G20’s view of the trade war’s impact on global growth have served to reinforce this fear even further,” he said in a daily note.
Elsewhere on Nymex, August gasoline RBQ8, +1.12% tacked on 1.1% to $2.091 a gallon, while August heating oil HOQ8, +0.74% ended at $2.118 a gallon, up nearly 0.7%. August natural gas NGQ18, -1.45% fell 1.3% to $2.721 per million British thermal units.