Oil Prices Jump after Trump Declares "Economic Warfare"


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- Oil prices rose to their highest in more than three weeks 
Thursday (8/20) morning amid dimming peace prospects and fresh concerns over 
Iranian oil supply as the U.S. and UAE ramped up economic pressure on the 
country.

   By 08:30am ET, ICE Brent for October delivery rose $3.00 to $94.62 bbl, and 
NYMEX WTI for September delivery on its last trading date advanced $3.17 to 
$89.00 bbl. The October contract rose $3.22 to $87.61 bbl.

   Downstream, NYMEX ULSD futures for September delivery gained $0.0561 to 
$4.5084 gallon, and front-month RBOB futures inched up $0.0017 to $3.2568 
gallon.

   The US dollar index continued to soften following yesterday's 0.823-point 
slump, edging lower by 0.051 points to 98.680 against a basket of foreign 
currencies.

   U.S. President Donald Trump on Wednesday in a social media post announced 
"economic warfare and isolation" against Iran. He specifically mentioned oil 
smuggling, raising concerns that sanctioned Iranian crude oil flows may ebb 
even further. Sanctions on Iranian oil trade, in place since 2018, had, while 
denting Tehran's purse, proven largely ineffectual in lowering the country's 
oil exports, and ship tracking data suggest that flows were continuing even 
amid the U.S. naval blockade of Iranian ports, albeit at a trickle.

   The president also threatened economic consequences to every country not 
severing economic ties with or providing help to Iran. The move stoked concerns 
over a prolonged status-quo, as economic pressure campaigns have in the past 
failed to bring Tehran to the negotiating table, and given the long history of 
Iran's largest trading partners skirting U.S. sanctions. If anything, Iran has 
during this now almost six-month long war repeatedly met perceived U.S. 
escalations with attacks on military and energy assets in the region.

   U.S. oil inventory data also lent price support. The Energy Information 
Administration on Wednesday reported that diesel inventories fell to their 
lowest in a month, and were at their most depleted for the corresponding 
reporting week since August 1996. Total crude stockpiles also receded despite a 
large surprise build in commercial inventories, as volumes in the Strategic 
Petroleum Reserve fell to their lowest since 1982.




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