Futures Movers: Oil prices spurred higher by Trump’s Iran tweet

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Markets/commodities reporter

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Oil prices rose Monday amid a testy exchange between U.S. and Iranian leaders that underlined fears about the potential for disruptions to output in the Middle East and tighter global crude supplies.

President Donald Trump “has provided a shot in the arm for prices to start the week, turning up the heat regarding tension with Iran once again,” Matt Smith, director of commodity research at ClipperData, told MarketWatch. “Iranian crude exports have dropped to a six-month low so far in July — a trend which will continue apace if the U.S. administration has its way.”

Trump on Sunday tweeted an all-caps message to his Iranian counterpart, Hassan Rouhani, warning that threats against the U.S. will be met with “consequences…few in history have suffered before.” The tweet appeared to refer to comments Rouhani had made warning against hard-line U.S. policies on Iran.

September Brent crude LCOU8, +0.88% traded 42 cents, or 0.6%, higher, at $73.49 a barrel on ICE Futures Europe. The global benchmark had marked a weekly loss of about 3% through Friday, logging its third straight weekly fall.

September West Texas Intermediate crude CLU8, +0.57% which became the front-month contract at Friday’s session close, added 30 cents, or 0.4%, at $68.56 a barrel Monday. The August contract, the U.S. benchmark, finished Friday at $70.46 a barrel, the highest level in a week, but not enough to reverse a 0.8% weekly drop, which was also the third decline in a row.

Read: Oil prices could top $120 before year-end

“Iran will not back down, and we think there’s a Russian connection. With Trump finally talking tough about [Russian President] Vladimir Putin, we suspect that there were phone calls between Moscow and Tehran in recent days, and now there’s a new crisis for Trump: Putin may have sent Trump a message—turn on me, and I’ll play my Iranian card,” said Greg Valliere, chief global strategist with Horizon Investments. “There’s a potential market impact here and that obviously is oil prices.”

Trump in May withdrew the U.S. from a 2015 international agreement to curb Iran’s nuclear program, setting the stage for the reimposition of economic sanctions that are expected to hinder Iran’s oil industry. Analysts have estimated up to 1 million barrels a day out of Iran’s more than 2.5 million barrels a day of crude exports could be at risk.

The May decision helped Brent climb to its highest level in over 3 ½-years, temporarily breaching the symbolic $80-a-barrel threshold. Brent is up around 54% over the last 12 months, while WTI is up roughly 47% over the same stretch.

News of a 24-hour oil workers’ strike, which shut down output at Total’s North Sea platforms, also supported oil prices Monday. A series of 24-hour and 12-hour stoppages are planned in the coming weeks, according to S&P Global Platts.

“The total production flow from the fields is quite minimal and there are no disruptions from the strikes as yet as stored crude is expected to continue the supply flow,” said analysts at ICICI Bank, in a daily note.

Data from oil-field services firm Baker Hughes BHGE, +1.66%  on Friday also pointed to a decline in U.S. oil activity. The number of U.S. oil rigs fell by 5 last week to 858.

At the same time, prices have been tempered by rising supply from the Organization of the Petroleum Exporting Countries — led by Saudi Arabia — and producing allies like Russia following a decision in late June to begin ramping up output after more than a year of holding back production.

Market concerns over the U.S.-China trade dispute continue to the Group of 20 leading nations, at a summit in Argentina, warned of the impact of a trade war on the global economy, and emphasized the need to re-establish constructive dialogue between the U.S. and China, according to Mihir Kapadia, chief executive officer of Sun Global Investments.

“The growing trade conflict has already raised concerns within the oil markets of decreased demand, and the G20’s view of the trade war’s impact on global growth have served to reinforce this fear even further,” he said in a daily note.

In other energy dealings on Nymex, August gasoline RBQ8, +0.87%  tacked on 0.6% to $2.082 a gallon, while August heating oil HOQ8, +0.96%  traded at $2.122 a gallon, up 0.8%. August natural gas NGQ18, -1.27%  fell 1.1% to $2.726 per million British thermal units.

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