WTI, Brent Futures Advance Monday

WASHINGTON, D.C. (DTN) -- Nearest delivered New York Mercantile Exchange oil futures and Brent crude on the Intercontinental Exchange settled mixed on Monday. West Texas Intermediate and Brent reversed off one-month lows to settle with modest gains amid escalating tensions in the Middle East, as the United States sends in forces to counter Iran's aggression.

Nymex June WTI futures edged up $0.31 to settle at $62.25 per barrel (bbl), while ICE July Brent gained $0.39 with a $71.24 bbl settlement. Nymex June ULSD futures moved 0.26 cents down to $2.0676 gallon, while June RBOB futures plunged 2.99 cents to $1.9966 gallon.

The United States announced on Monday it deployed USS Abraham Lincoln carrier strike group and bombers to the heart of global crude production as a deterrent to Iran's threats in the region. Islamic Republic has previously threatened to block the Strait of Hormuz, a chokepoint for crude shipments out of the Persian Gulf, after Trump tightened sanctions on Iranian barrels last week.

According to the White House, there have been "a number of troubling and escalatory indications and warnings" recently of Iran assembling and moving assets both on land and sea. The deployment comes weeks after the White House decided to designate Iran's Islamic Revolutionary Guard Corps as a foreign terrorist organization, which Iran has cast as a provocation.

Iran has also mobilized all of its resources to sell oil in the "grey market," according to a top Iranian official. Amir Hossein Zamaninia, Iran's deputy oil minister, said on Sunday that Islamic Republic will continue deliveries of supplies to the key buyers of Iranian oil, including China, India and Turkey. According to wire services, during previous U.S. sanctions, Iran sold oil at steep discounts and often through private firms.

In other news, Saudi Arabia lowered prices of all crude grades to the United States for June while raising costs for Asian buyers. The announcement appeared to be aimed to better compete with record production in the United States. Energy Information Administration reported U.S. crude production at a 12.3 million barrels per day (bpd) in late April, while inventory increased by a larger-than expected 9.9 million bpd, pushing stocks to a 19-month high. Analysts expect U.S. crude inventories to have again increased last week.

Oil futures were pressured earlier on Monday after U.S. President threatened to escalate a trade war with China by slapping 25% tariffs on all Chinese imports into the United States.

U.S. Trade Representative Robert Lighthizer said China was pulling back from some previous commitments, indicating a breakdown in months-long trade negotiations. WTI tumbled almost 2% in early morning trading amid fears that a trade war with China could cause a recession, sending prices lower. According to several reports, The United States had been targeting May 10 to announce a deal, that would be finalized and signed by Trump and Chinese President Xi Jinping later at an official summit.

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