Oil prices slipped on Monday after initial increases on US – Iran tensions.  Oversupply concerns wiped out the early gains as Saudi Arabia and other large producers ramp up their production. Saudi Arabia Oil Company photo.

Oil prices initially up on Iran-US tensions

Oil prices settled down slightly on Monday after initially rising on mounting tensions between the United States and Iran.  Last week’s announcement by Saudi Arabia and other large producers that they will boost their production to head off supply shortages concerned investors and kneecapped earlier oil price increases.

Brent crude settled the day down 1 cent at $73.06/barrel and US crude dipped 37 cents to $67.89/barrel, down from a session high of $69.31.  The Canadian Crude Index fell 8 cents to $41.11.

Saudi Arabia is boosting its production to alleviate strain on the market in November, the deadline set by the US for countries to comply with the Trump administration’s sanctions against Iran.

On Saturday, Iranian Supreme Leader Ayatollah Ali Khamenei came out in favour of President Hassan Rouhani’s suggestion to block Gulf oil shipments if Iranian crude exports were halted due to US sanctions.

Phil Flynn, analysts at Price Futures Group told Reuters that last week’s volatile market swings are continuing”

“They’re just continuing to chase from one headline to another,” said Flynn.

Genscape reports that US crude inventories at the Cushing, Oklahoma delivery hub grew in the last four days prior to Friday.  Traders, however, predict that inventories at the hub will fall for the 10th consecutive week.

Ongoing concerns about the trade dispute between the United States and a number of trading partners are also weighing down the market.

At the recent meeting of G20 finance ministers and central bank governors in Buenos Aires over the weekend, officials called for increased dialogue to prevent trade and geopolitical tensions from stymieing growth.

“Downside risks over the short and medium term have increased,” the finance leaders said in a statement.

The announcement came days after US President Donald Trump threatened to slap tariffs on all $500 billion in goods imported from China unless Beijing agreed to major changes in its technology transfer, industrial subsidy and joint venture policies.

Economic growth and oil demand are linked as expanding economies support fuel consumption for trade, travel and automobiles.

A tweet from President Trump late Sunday night threatened Iran with dire consequences “the like of which few throughout history have suffered before” if the Islamic Republic made any more threats against the US.

“Attention is being focused on geopolitical tensions, particularly between U.S. and Iran,” Gene McGillian, director of market research at Tradition Energy told Reuters.

“Fundamentally, we do have a tighter picture than we had twelve months ago.”