New York — Oil futures settled sharply lower Tuesday after White House statements pointed to a potential thaw in Middle East tensions.
NYMEX August WTI settled down $1.96 at $57.62/b and ICE September Brent was $2.13 lower at $64.35/b.
Oil futures moved sharply lower after US Secretary of State Mike Pompeo said Tuesday afternoon at a White House cabinet meeting that Iran is prepared to negotiate with the US over its missile program, according to media reports.
US President Donald Trump underscored Pompeo's comments, saying progress has been made with Iran and that the US was not looking for a regime change in Tehran.
The comments appeared to markedly defuse a long-simmering standoff with Iran, but analysts indicated the downside market impact of the comments could be limited.
"The possibility of US-Iran rapprochement seems to be deflating geopolitical risk right now," Tradition Energy analyst Gene McGillian said. "The initial headline seems to indicate that some sort of deal, for lack of a better term, is imminent, but I think the market needs to see more proof it's actually going to happen."
NYMEX August RBOB settled 3.85 cents lower at $1.8918/gal and August ULSD fell 4.67 cents to close at $1.9049/gal.
Oil futures had been trading higher after Iran's Supreme Leader, Ayatollah Ali Khamenei, ratcheted up tensions with the UK over the seizure by British authorities of a tanker carrying an Iranian crude cargo earlier this month.
Front-month WTI futures briefly traded up to a session high of $60.06/b and Brent touched $67.09/b Tuesday morning.
In a televised speech earlier Tuesday, Khamenei described the seizure as "piracy" and said it would not go unanswered by Tehran. It was the first time the Iranian leader had publicly commented on the incident.
Earlier in July, the supertanker Grace 1 was arrested in Gibraltar by the Gibraltar government and the UK Marines for breaching EU sanctions for allegedly carrying a Syria-bound oil cargo.
Last week, Iran threatened to retaliate by targeting UK ships, and the British government said a tanker owned by BP, the British Heritage, was approached by three Iranian vessels in the Persian Gulf. The Iranian ships turned back, however, after a British Navy frigate accompanying the tanker intervened.
The US Department of Defense and Department of State plan on Friday to unveil a "maritime security initiative" for the Persian Gulf, Strait of Hormuz and Gulf of Oman, Brian Hook, State's special representative for Iran, said during an Axios event Tuesday.
Military escorts of oil shipments through the Strait of Hormuz by a US-led coalition will deter additional attacks and "provocation or miscalculation" through the key oil chokepoint, US Secretary of Defense nominee Mark Esper said at a separate event Tuesday.
GULF COAST CRUDE PRICES JUMP AS PRODUCTION SHUT-INS EXTEND
August barrels of US Gulf Coast sour crude Mars and Louisiana Light Sweet spiked Tuesday, as the market continued to react to production cuts following Hurricane Barry.
Mars crude was assessed by S&P Global Platts Tuesday at a $5.20/b premium to NYMEX WTI, and LLS was pegged at $6/b above WTI.
About 1.1 million b/d, or 58% of the US Gulf of Mexico's oil output, remains shut-in as drillers slowly restore operations after Barry made landfall over the weekend, the Bureau of Safety and Environmental Enforcement said Tuesday. At the peak on Sunday, around 1.4 million b/d of crude production, or 73% of total US Gulf output, was shut-in by the storm, BSEE data showed. July's US Gulf production is expected to be down 260,000-350,000 b/d as a result, according to S&P Global Platts Analytics.
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