U.S. oil prices fell back below $70 a barrel after President Donald Trump tweeted that he would announce a decision on the Iranian deal Tuesday afternoon. The benchmark crude price fell more than $1 a barrel immediately after the tweet, dropping below the $70 mark for the first time all day. The decline claimed most of West Texas Intermediate’s gains for Monday, with oil trading up 11 cents at $69.83 at 3:38 p.m.
The surprise announcement of a decision tomorrow at 2 p.m. in Washington comes ahead of a May 12 deadline for the U.S. to either waive or reimpose sanctions as part of a nuclear deal with Iran and world powers. The Trump administration heard arguments in favor of the accord last week from French President Emmanuel Macron and German Chancellor Angela Merkel. U.K. Foreign Minister Boris Johnson is in Washington this week to make a last-ditch argument to persuade Trump to remain in the accord.
The fact that Trump announced the decision time without once again slamming the deal could have given the market some confidence that it may not be entirely scrapped, said Josh Graves, senior market strategist at RJO Futures. “The market is probably considering from his comments that we stay in this deal. That we would tweak it and not totally leave the deal,” he said. Keeping the deal would mean “oil could trade back down to mid-$60s,” said Graves. The 2015 Iran accord eases sanctions on the third-largest producer in the Organization of Petroleum Exporting Countries in exchange for curbs on its nuclear program.
U.S. consumers have felt the pain of rising crude prices since the start of the year. Gasoline prices, already near the highest level since November 2014, are likely to push even closer to the $3 a gallon mark as the futures market rally filters through to the retail level.
“Killing the deal may inflict more pain on motorists, as it may lead to sanctions placed on Iran and their oil production, which would likely push oil prices higher,” Patrick DeHaan, head of petroleum analysis for GasBuddy, said Monday in a note.
High or even higher gasoline prices ahead of U.S. midterm elections this year “could be a factor in leading the U.S. president to reconsider calling off the Iran deal,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. Iran has ruled out new talks, calling the current agreement “non-negotiable.” If the U.S. decides to exit the deal, “it will quickly see that this decision will be a regret of historic proportions,” Iranian President Hassan Rouhani told crowds at a rally on Sunday in the northeastern city of Sabzevar.
The market is also focusing on Venezuela, after ConocoPhillips was said to be working to take Venezuelan oil assets in the Caribbean to fulfill a $2.04 billion arbitration award. Brent for July settled $1.30 higher at $76.17 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude, which is also on course for the highest close since November 2014, was at a $5.55 premium to July WTI.
Meanwhile, oil prices in the Permian — the prolific shale field in West Texas — fell further below the U.S. benchmark amid lingering bottleneck issues. West Texas Intermediate crude in Midland slipped 25 cents to $12.75 a barrel below WTI in Cushing, the biggest discount since August 2014.
Sources and photo-credits: Bloomberg