By Barani Krishnan
Investing.com - After his extended support for oil bears, President Donald Trump is lending a little help to the bulls now.
U.S. crude settled a touch lower on Tuesday, but U.K Brent rose on heightened tensions in the Persian Gulf after Trump targeted Iran’s Supreme Leader Ayatollah Ali Khamenei and other top officials with sanctions above those imposed on the Islamic Republic.
Tehran reacted with outrage, with President Hassan Rouhani calling the White House mentally disabled. The Iranian government added that hopes for a diplomatic solution had ended.
New York-traded West Texas Intermediate crude settled down 7 cents, or 0.1%, at 57.83 a barrel. WTI finished last week up 9.4% for its best weekly gain since the week to Nov. 27, 2016.
The September contract for London-traded Brent crude, the benchmark for oil outside of the U.S., settled up 10 cents, or 0.2%, at $64.28. Brent gained over 5% last week, its most since the week ended Feb. 15. The August contract was up 19 cents at $65.05 a barrel.
Trump’s tweets, speeches and actions over the past year have often disrupted the rally in oil more than fed it. But over the past week, his administration and Tehran have been adding to crude's geopolitical premium with their tough talk.
“The U.S. president does not want war with Iran,” Olivier Jakob at Swiss oil consultancy PetroMatrix said, quoting Trump. “But for survival, Iran is left with no choice than an escalation.”
Abhi Rajendran, head of North America Energy Research at Energy Intelligence, expressed a similar sentiment through.
“At least through year-end, (the) likelihood is just for more antagonism,” Rajendran said.
Always relishing a good fight on Twitter, Trump countered Rouhani's remarks by saying, "Iran's very ignorant and insulting statement, put out today, only shows that they do not understand reality. Any attack by Iran on anything American will be met with great and overwhelming force."
"In some areas, overwhelming will mean obliteration. No more John Kerry & Obama," Trump tweeted, referring to the way the former U.S. president and his secretary of state produced the first global nuclear accord with Iran.
Just before the sanctions he announced on Iran’s top leadership, Trump said he was prepared to negotiate with Tehran, without preconditions, in a bid to ease tensions building since he withdrew the U.S. a year ago from a global nuclear deal with theIslamic Republic and began pressuring it with economic sanctions.
Oil prices were also boosted by expectations that weekly data due from the U.S. Energy Information Administration on Wednesday will show a 2.89-million-barrel drop in crude stockpiles, almost matching the last decline of 3.11 million barrels. The American Petroleum Institute will issue a snapshot at 4:30 PM ET (20:30 GMT) on what the EIA’s numbers for the week ending June 21 are likely to be.
Meanwhile, Kremlin spokesman Dmitry Peskov said Tuesday Russian President Vladimir Putin will meet Saudi Crown Prince Mohammed Bin Salman at this week’s G20 summit.
Although Peskov did not provide details, the two will be sure to discuss whether and how to extend the current production cut agreement between OPEC and other producers, of which Russia is by far the largest. Recent remarks from Russian Energy Minister Alexander Novak have suggested that Russia still needs to be convinced to follow through on the deal, not least because the oil price it needs to balance its budget is significantly lower than the price that Saudi Arabia needs. The meetings will be held July 1-2