Oil retreated as US President Donald Trump questioned America’s interest in securing a key Persian Gulf waterway, adding to the uncertainty over the simmering confrontation with Iran.
Benchmark Brent crude futures slid as much as 1.5% while US crude extinguished an early rally and lost almost 1%.
Trump in a tweet asked “why are we protecting" the Strait of Hormuz, adding: “we don’t even need to be there." Yet he also said new sanctions would be imposed on the OPEC producer after it shot down an American spy drone last week.
“It’s unclear what the next step is in the Persian Gulf," said Marshall Steeves, an energy markets analyst at Informa Economics in New York. “We don’t know if there is going to be another attack, what the duration of the hostilities will be. There are a lot of unknowns."
Russia added another wild card for oil traders on Monday, with Energy Minister Alexander Novak declining to say whether his nation supported an extension of production cuts with OPEC that many investors see as crucial to stabilizing crude markets.
A decision will have to wait until after this week’s G-20 summit of major world economies, he told reporters in St. Petersburg.
US oil completed its best weekly gain in more than two years on Friday, adding 9.4%, after Iran downed the American drone, and Monday’s decline may have included investors selling out of the market to lock in profits, Steeves said.
Traders are also awaiting two key meetings over the next week. Trump is set to meet with Chinese President Xi Jinping at the G-20 summit in Japan, raising hopes they can restart stalled trade talks. Days later, OPEC, Russia and other top suppliers will gather in Vienna.
“The events of last week mean that there is much for oil bulls to hang their hats on,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd. in London.
West Texas Intermediate for August delivery fell 44 cents, or 0.8%, to $56.99 a barrel on the New York Mercantile Exchange as of 11:20 a.m. Brent for August settlement slipped 81 cents to $64.39 on London’s ICE Futures Europe Exchange and traded at a premium of $7.36 to WTI.