Oil prices rally as US prepares to partially evacuate staff from Baghdad Embassy

Crude oil futures rallied June 11 following news that the US State Department is reportedly preparing to evacuate nonessential staff from the US Embassy in Iraq due to rising tensions in the region.

NYMEX July WTI settled $3.17 higher at $68.15/b and ICE August Brent rallied $2.90 to settle at $69.77/b.

"President [Donald] Trump is committed to keeping Americans safe, both at home and abroad," a State Department official said June 11.

"In keeping with that commitment, we are constantly assessing the appropriate personnel posture at all our embassies. Based on our latest analysis, we decided to reduce the footprint of our mission in Iraq," the State Department official said.

The State Department is preparing to order the evacuation of nonessential personnel from the US Embassy in Baghdad, according to the AP. The department is also reportedly authorizing nonessential personnel and family members to evacuate from the embassies in Bahrain and Kuwait, the AP said.

In addition, the UK Maritime Trade Operations on June 11 issued an advisory for vessels to use caution in the Persian Gulf, the Gulf of Oman and the Strait of Hormuz.

More than 19 million b/d of seaborne crude, condensate and refined product exports pass through the Persian Gulf, according to S&P Global Commodities at Sea.

"UKMTO has been made aware of increased tensions within the region, which could lead to an escalation of military activity having a direct impact on mariners," the advisory said.

Iranian warning

Iranian Defense Minister Gen. Aziz Nasirzadeh said that after recent nuclear talks, some US officials were making threats of "confrontation and blood." But he warned that Iran would respond, according to comments on Iranian state TV.

"Hopefully, we don't get to that point and the talks reach a result," Nasirzadeh said. "But if not, and we are forced into a confrontation, definitely the casualty toll of the other side will be more than ours."

"In that case, the US must leave the region because all its bases are within our reach and we will target them without any reservation in the host countries," Nasirzadeh said.

Iran exports around 1.5 million b/d of crude, but that level could rise or fall based on the outcome of nuclear talks with the US, which have been ongoing since April.

A deal could boost Tehran's crude exports by 500,000 b/d, with a short-term crest of 900,000 b/d as floating storage clears, but a collapse of talks could cut exports by 400,000 b/d, due to additional pressure from sanctions, according to analysts at S&P Global Commodity Insights.

Iran's oil minister Mohsen Paknejad on June 11 downplayed the impact of US sanctions on Iran's oil sector.

"Naturally the sanctions have been imposed with the aim of restricting oil sales. But proportional to these restrictions, we have been employing particular solutions," Paknejad said. "Therefore, these sanctions have not made considerable impacts on Iran's oil sales trend in the past few years," he said.