Oil tankers pass through the Strait of Hormuz, December 21, 2018. Reuters/Hamad I Mohammed
Oil rallied as the U.S. and Iran heated up their rhetoric in a standoff that threatens to engulf the heart of global oil production.
Futures in New York rose as much as 0.8% on Tuesday and were set to close above $58 a barrel for the first time this month. Iran said that new American sanctions had shut the door to diplomacy between the two countries ``forever'' and President Hassan Rouhani said the White House suffered from a "mental disorder.” U.S. President Donald Trump warned that any attack on U.S. assets could be met, in some areas, with "obliteration.”
Yet prices flipped several times between gains and losses during a choppy trading session that brought reminders of the fragile economic outlook. American officials downplayed expectations of a trade-war resolution ahead of a highly anticipated meeting between Trump and China’s Xi Jinping. New home sales in the U.S., meanwhile, slipped to a five-month low.
"Oil squeezed higher last week on tensions in the Middle East, but with so much uncertainty regarding the trade war and global economy, the demand argument is too shaky for a sustainable rally just yet,” Tyler Richey, co-editor at Sevens Report Research in Palm Beach Gardens, Florida, wrote in a note to clients.
West Texas Intermediate for August delivery climbed as far as $58.38, its highest since May 30, and was at $58.03 a barrel on the New York Mercantile Exchange as of 12:38 p.m. Brent for August settlement rose 30 cents, or 0.5%, to $65.16 a barrel on London’s ICE Futures Europe Exchange.
See also: Malaise in Top Oil-Consuming Region a Warning Sign for OPEC+
Trump told reporters at the White House that the new sanctions would deny financial resources to Iran’s supreme leader, Ayatollah Ali Khamenei, calling him "responsible for the hostile conduct of the regime.” The penalties "mean the permanent closure of the diplomatic path with the government of the United States,” Iran Foreign Ministry spokesman Abbas Mousavi said later, according to the semi-official Iranian Students News Agency.
