Oil Futures Slip on Potential New Deal

WASHINGTON (DTN) -- New York Mercantile Exchange nearest delivery oil futures and Intercontinental Exchange Brent settled fractionally lower on Monday, weighed down by reports of a potential de-escalation in Middle East tensions related to Iran's nuclear program, while the tit-for-tat tariff war between the United States and China continues to feed the market's bearish sentiment.

NYMEX October West Texas Intermediate futures slipped $0.53 to settle at a $53.64 barrel (bbl) 2-1/2 week spot low, reversing off a $55.26 bbl intraday high. ICE October Brent settled $0.64 lower at $58.70 bbl, while November Brent futures ended the session at a $0.58 discount to the October contract, which expires end-of-day Friday (8/30). NYMEX September RBOB futures moved 2.64 cents lower to settle at $1.6165 gallon, with October RBOB futures narrowing its discount to the expiring contract to 10.86 cents, reflecting gasoline's seasonal characteristic. September ULSD contract settled down 2.32 cents at $1.7924 gallon, a nearly 2-1/2 week low, with October delivery ending at a 0.83 cents premium to the September contract.

The U.S. dollar strengthened 0.47% to 97.989 in afternoon index trade, pressuring dollar-denominated oil futures.

Crude benchmarks reversed earlier gains after reports emerged that U.S. President Donald Trump would, under the right circumstances, hold a meeting with Iranian President Hassan Rouhani to resolve the geopolitical tensions in the region, lifting the chance for the removal of sanctions on Iranian crude exports.

Trump, who is in France at the G7 meeting, said he had "good feelings" about the prospect of a new nuclear deal with Iran, according to wire reports.

The Trump administration withdrew from the Obama-era nuclear deal in May 2018, and issued a list of 12 "requirements" for a new agreement, including the complete dismantling of its ballistic missile program and ending its involvement in regional conflicts. Tehran earlier dismissed the requirements as unacceptable.

Despite reports of easing in U.S.-Iran tensions, market sentiment remains dominated by headlines regarding the latest flare-up in the trade war between the global economy's two giants, which sent markets spiraling lower on Friday. China announced tariffs on $75 billion of U.S. imports on Friday, prompting the United States to announce additional tariffs on Chinese imports to the United States.

A European Central Bank official told leaders at the G7 Summit that under current circumstances there was "no clear sign of stabilization" in global trade.

According to the latest data from the Bureau of Economic Analysis, world commerce fell for the eighth consecutive month in June, with U.S. goods exported to China down 18% for the first half of the year and imports from China down more than 12%.

NYMEX WTI futures remains above the August low of $50.52 bbl despite worries over the global economy, with noncommercial traders reducing their bearish bets on crude through the week ended Aug. 20 on short-covering, data from the Commodity Futures Trading Commission shows. In contrast, speculators reduced a net-long position in NYMEX RBOB futures to a 25-month low, reflecting not only the end of peak seasonal demand, but a well-supplied market.

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

(BAS)