Oil Futures Settle Mixed

WASHINGTON, D.C. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled mixed on Monday, with the international Brent benchmark reversing some of last week's gains even as the Trump administration slapped new punitive financial sanctions on Iran, while ongoing concerns over decelerating global demand limited the upside.

NYMEX August West Texas Intermediate gained $0.47 to $57.90 per barrel (bbl) at settlement, finding support from weakness in the U.S. dollar, which settled at three-month low in index trading on Monday. ICE August Brent futures settled down $0.34 at $64.86 bbl, giving up a fraction of the hefty gains from last week. NYMEX July RBOB futures settled flat, down 0.12cts at $1.8549 gallon, underpinned by Fridays' multiple fires at Philadelphia Energy Solution's 335,000 barrels per day (bpd) Philadelphia Refinery Complex, which is situated near the New York Harbor delivery locations for the futures contract. NYMEX July ULSD futures were down 0.69cts at $1.9089 gallon at settlement.

Oil futures were little changed Monday even as the Trump administration moved with additional sanctions against Iran's leadership and questioned the United States presence in defending the Strait of Hormuz. U.S. President Donald Trump imposed broad restrictions on Iran's Supreme Leader Ayatollah Khomeini and his close allies from using financial services provided or protected by the U.S. financial system. "These measures represent a strong and proportionate response to Iran's increasingly provocative actions," Trump told reporters in the Oval Office.

The United States has consistently increased the scale of economic sanctions against Iran since the Trump administration withdrew from the global nuclear deal with Tehran. The Islamic Republic has since decried U.S. sanctions, which restrict it from selling its crude oil internationally, as "economic terrorism."

Earlier, Trump also suggested the United States should not protect ships in the strategic Strait of Hormuz without compensation from other countries. The U.S. blamed Iran for the previous attacks on oil tankers near the Strait of Hormuz, while geopolitical tensions escalate in the region that is crucial to global oil supplies. Reuters previously reported that Asian refiners have started to look for alternative crude sources that could avoid shipping through the Strait of Hormuz, which include West African and U.S. suppliers. Some analysts believe the latest escalation in geopolitical tensions could result in a meaningful pickup in demand for non-Strait of Hormuz-linked barrels.

Market participants seemed to turn attention on Monday to the upcoming meeting between U.S. President Trump and his Chinese counterpart Xi Jinping at the G-20 Summit in Japan, as it could determine the direction of oil markets for the upcoming months. Despite bullish news out of China this weekend confirming Xi's participation in the summit, the U.S. Commerce Department announced new export restrictions on Friday that effectively bar all major Chinese developers of next generation computers from obtaining U.S. technology.

While some analysts believe the move could further strain relations between the United States and China ahead of a planned meeting in Japan, others say it gives Trump administration additional leverage in the negotiations. Many economists project a "mild recession" in the global economy, if the meeting between the two presidents fail to produce a positive outcome.

Liubov Georges can be reached at liubov.georges@dtn.com

(CZ)

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