OLD BRIDGE, N.J. (DTN) -- Oil futures nearest to delivery traded on the New York Mercantile Exchange (NYMEX) and Brent crude on the Intercontinental Exchange (ICE) continued higher in early trade Monday following stepped up rhetoric between the United States and Iran over the weekend, with an Iranian challenge to U.S. power prompting a quick response from U.S. President Donald Trump on Twitter.
In a tweet, Trump told Iranian President Hassan Rouhani to "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!"
The renewed rhetoric comes amid media reports from Reuters, indicating Iran is encouraging private companies to subvert upcoming U.S. sanctions against the regime by purchasing exported crude oil through its private sector exchange.
"Iranian crude oil will be offered on the bourse and the private sector can export it in a transparent way," First Vice President Eshaq Jahangiri reported at an economic event in Tehran broadcast live on state television Sunday.
U.S. sanctions targeting Iran's economy, including oil sales, take effect in November following a May decision by the United States to pull out of the 2015 Iran nuclear accord. While the U.S. will permit a limited number of waivers for select countries not able to fully unwind from financial dealings with Iran prior to the November deadline, most think the sanctions will slash Iran's crude oil exports.
The move also comes amid another threat to interrupt the flow of oil shipments through the Strait of Hormuz, though few believe the U.S. Navy would allow that to occur.
"The markets are up today on the weekend rhetoric developing between the U.S. and Iran," said William Wilson, commodities broker with Washington, D.C.-based PowerHouse, a commodity hedge and trade advisory. "I'd be a cautious buyer, but in the short term, if it's up on just the Iranian comments, I would not be a raging bull."
Iran is the third largest producer within the 15-member Organization of the Petroleum Exporting Countries (OPEC), with crude output in June at 3.799 million barrels per day (bpd), behind Saudi Arabia and Iraq. The International Energy Agency (IEA) reported Iranian crude exports declined by 230,000 bpd in June versus May figures on an estimated 50% decline in purchases out of Europe.
Near 9 a.m. ET, the September NYMEX West Texas Intermediate (WTI) futures contract was 92 cents higher at $69.18 barrel (bbl). ICE September Brent was 97 cents higher at $74.04 bbl, while the October contract rose $1.02 to $74.16 bbl.
NYMEX August RBOB contracts were 2.26 cents higher at $2.0916 gallon, while the August ULSD contract was up 2.67 cents to $2.1311 gallon.
Brian Whary can be reached at email@example.com
Copyright 2018 DTN/The Progressive Farmer. All rights reserved.