By Barani Krishnan
Investing.com – President Trump railed out against Iran’s “blood lust” and said sanctions on its oil will be tightened unless it changed its ways. But instead of rising on those remarks, crude prices fell on Tuesday as Iran’s leader agreed to tweak a nuclear deal that made Trump hit Tehran with sanctions in the first place.
U.S. West Texas Intermediate crude and U.K. Brent oil fell more than 2% each after Trump also lashed out at China, signaling dimmer hope for a trade deal between the two nations.
WTI settled down $1.35, or 2.3%, at $57.29 per barrel.
Brent slid by $1.67, or 2.6%, to $63.10.
Iranian President Hassan Rouhani, attending the United Nations General Assembly, told reporters said he was alright with revisting a 2016 nuclear pact that Tehran had agreed with the United States and other foreign powers. Trump tore up that agreement last year, calling the initiative by his predecessor Barack Obama, “the worst deal ever” and reimposed sanctions on Tehran.
Rouhani said on Tuesday he was willing “to discuss small changes, additions or amendments to (the) nuclear deal if sanctions were taken away”, Reuters reported.
Trump, who later addressed the assembly, said “no responsible government should subsidize Iran’s bloodlust”, referring to the constant “Death To America” chants by the Islamic Republic.
Washington has blamed Iran for last week’s attack on Saudi Arabia’s oil facilities, an accusation that has gained momentum in the past 24 hours as Europe’s big three — Britain, France and Germany — joined in fingering Tehran for the Sept. 14 air raids.
The three nations were original signatories to the 2016 nuclear deal with Iran and had supported the Islamic Republic through much of its sanctions row with the United States.
But the three also urged Iran on Monday to accept “a long-term negotiation framework for its nuclear program” — a suggestion seen as coaxing Iran to renegotiate its 2016 agreement with world powers. Rouhani seemed headed that way on Tuesday, after a meeting with French President Emmanuel Macron, who reiterated that message.
Trump, in his speech to the assembly, indicated no mood to go easy on Iran.
“As long as Iran’s menacing behavior continues, sanctions will not be lifted,” said the president, who reinstated a U.S. oil embargo on Iran last November after pulling out of the 2016 nuclear pact earlier in the year. “They will be tightened.”
But oil traders who have grown familiar with Trump’s vacillating ways hedged for the possibility that he would meet with Rouhani after all.
A U.S.-Iran summit has been in the cards for months, with Trump even suggesting days before the Saudi attack that he might be open to lifting sanctions as precondition to the talks. Rouhani seemed resistant to any diplomatic efforts then, though the Iranian leader seems to the one extending the olive branch this time, even coming to the U.N. with a peace plan for the Middle East.
Trump’s zeal to be known as a dealmaker is not lost on political strategists who point out that a new Iran nuclear agreement would be a plum prize for the president as he heads into the 2020 reelection campaign.
Iran said in May that it intends to produce at least 1.5 million barrels per day of oil if it is to enter and stay in a new nuclear deal with world powers. That could be an onerous burden for a market that has completely discounted Iranian production since the U.S. sanctions came into force in November 2018.
“Whatever Trump says, I still believe he will want to make a deal with Iran and that’s what the market fears — the oncoming of additional supply it isn’t prepared for,” said John Kilduff, founding partner at New York energy hedge fund Again Capital Management.
Trump also struck a combative tone against China in his address to the U.N. assembly.
“Not only has China declined to adopt promised reforms, it has embraced an economic model dependent on massive market barriers, heavy state subsidies, currency manipulation, product dumping technology transfers and the theft of intellectual property and also trade secrets on a grand scale,” the president said.