Oil off Highs as U.S. Tries to Limit Fallout From Seized U.K. Tanker

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© Reuters.  © Reuters.

By Barani Krishnan

Investing.com – Crude futures remained higher in Monday’s early afternoon trade in New York, but the gains were much smaller than they were at the session highs after U.S. Secretary of State Mike Pompeo indicated the administration wouldn’t use the seizure of the British-flagged Stena Impero tanker as a reason to escalate its standoff with Iran.

U.S. settled up 25 cents, or 0.5%, at $55.88 per barrel, after trading as high as $57.02 earlier. Last week, WTI fell over 7% for its sharpest loss in seven weeks.

London-traded , the benchmark for outside of the U.S., rose 53 cents, or 0.9%, to $63. The session high was $64.02. Brent lost more than 6% last week for its biggest slide in seven months.

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“The responsibility … falls to the United Kingdom to take care of their ships,” Pompeo told Fox News.

His remarks reinforce market conviction that Washington remains hopeful of steering Iran towards talks to replace the 2015 nuclear accord that Trump’s predecessor Barack Obama helped achieve with other global powers. The current U.S. administration withdrew unilaterally from the agreement a year ago, using sanctions against Iran’s oil to force into new negotiations that would require greater submission by Tehran to prove will not develop nuclear weapons.

While Trump’s strategy is ostensibly to stabilize the by neutering the threat posed to Saudi Arabia and Israel by their greatest enemy, the president also needs Iran’s oil back in the market to tamp down prices of crude and gasoline at U.S. pumps ahead of his 2020 reelection bid.

“The thinking goes, if we are staring at a recession in 2020, the last thing (oil prices) will need is 2 million bpd of additional crude supplies from Iran,” U.K.-based consultancy Energy Aspects said in a note issued Monday.

Trump has said in the past that he wants OPEC to pump an additional 2 million barrels per day of oil to lower energy costs for U.S. consumers. Yet the cartel has gone the other way, tightening global supply by 1.2 million barrels per day since December 2018. OPEC wants to keep up the cuts up through March 2020 at least and might extend them thereafter. Just over a year ago, before the sanctions imposed by Trump, Tehran produced up to 2.5 million barrels per day of crude.

With the United States all but ignoring Britain’s predicament over the seized Stena Impero tanker, U.K. Prime Minister Theresa May held an emergency meeting on Monday to discuss the situation with British ministers. It wasn’t immediately clear what had been agreed.

While it maintains hope of starting talks with Iran, the U.S. has also accused the Islamic Republic of being behind two other tanker attacks in the region since May. On Friday, it threatened to down any Iranian drone that flew too close to U.S. Navy ships deployed in the Persian Gulf region. Last week, a Navy ship apparently shot down one of those surveillance planes.

On Friday, it threatened to down any Iranian drone that flew too close to U.S. Navy ships deployed in the Persian Gulf region after apparently shooting down one of those surveillance planes last week.

On Friday, it threatened to down any Iranian drone that flew too close to U.S. Navy ships deployed in the Persian Gulf region after apparently shooting down one of those surveillance planes last week.

As both sides keep open their options for peace, there are no immediate signs that they would agree to anything at all. Iran is demanding that Washington remove all sanctions against it for negotiations to start. An Iranian diplomat has also stated that Iran’s continued construction of ballistic missiles are “absolutely and under no condition negotiable with anyone or any country,” firmly reinforcing that it will not abandon its missile program. The Trump administration insists that there should be no preconditions for talks.

Oil’s rebound also softened on Monday after Libya’s National Oil Corporation lifted a declaration of force majeure on loadings at the port of Zawiya from the Sharara field, the country’s largest. That force majeure been in place since late Friday, shutting in production of 290,000 barrels a day. The field resumed half that output earlier Monday, Reuters reported.

Source: Investing.com