Oil Futures Finish Monday Mixed

OLD BRIDGE, N.J. (DTN) -- Oil futures nearest to delivery traded on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled mixed Monday. This came after an early morning rally triggered by a heated exchange between the leaders of the United States and Iran over the weekend that was discounted by the close while Saudi Arabia signals ample supply.

A veiled threat by Iranian President Hassan Rouhani over the weekend warning that a war with Iran "is the mother of all wars" generated a strong response from U.S. President Donald Trump of an overwhelming response and a warning to the Iranian leader to "be cautious" had rallied oil futures in early trading. Iranian officials have also said the Strait of Hormuz—a major trade route for oil that runs between Iran and Saudi Arabia—would be disrupted if its oil sales were harmed by U.S. sanctions.

The United States reimposed economic sanctions on Iran that take effect Nov. 4 after pulling out of the Iranian nuclear accord in May, with U.S. officials indicating it expects strong compliance, expressing a willingness to offer only a limited number of waivers for a select few nations unable to completely unwind from business dealings with Tehran ahead of the November deadline. Iran, which saw its oil exports halved during sanctions from 2012 to 2015, wants countries to circumvent the sanctions.

The International Energy Agency recently said Iranian crude exports declined by 230,000 bpd in June from May, "as European purchases dropped by nearly 50%."

Late last week it was revealed that Saudi oil production in July, which was expected to surge to a record high near 11.0 million bpd, is flat with June at 10.5 million bpd initially boosted oil futures. However, the Saudis said they were concerned with oversupplying the market, and further production increases are "without basis."

Previously, Saudi Arabia has said they would ramp up production if needed to counter lost supply from Venezuela, Libya and Nigeria. An increasing number of analysts expect Venezuelan production, which averaged 1.34 million bpd in June, to fall below 1.0 million bpd by year's end.

NYMEX September West Texas Intermediate crude futures settled near session lows at $67.89 bbl, down 37 cents, after trading as high as $69.31 bbl. ICE September Brent crude settled down 1 cents at $73.06 bbl, reversing from a one-week high of $74.50 bbl.

NYMEX oil products gained on the session, although pared early advances, with August RBOB futures ending up 2.24 cents at $2.0914 gallon after trading at a $2.1043 one-week high. August ULSD futures settled up 1.36 cents at $2.1180 gallon, fading from a $2.1414 one-week high.

Brian Whary can be reached at brian.whary@dtn.com