Brent, WTI fall as Trump appears to rule out Iran strikes before midterms

Hurricane Isaias cuts Gulf of Mexico offshore oil output 62.9 percent

Oil futures declined Friday, one day after both benchmarks surged 4.4%, as traders weighed President Trump’s pledge not to attack Iran before the Nov. 3 midterm elections against continuing supply risks in the Persian Gulf and extensive offshore production shut-ins in the Gulf of Mexico. December Brent crude futures fell 1.3% to $102.90 a barrel, while December West Texas Intermediate futures dropped 1.4% to $89.50 a barrel. Brent had risen as much as 5% earlier in Thursday’s session to $105.23 a barrel, and WTI had climbed 5% to $92.70, before both benchmarks pared gains.

Trump said Thursday that the U.S. would not attack Iran before the Nov. 3 midterm elections, citing what he called “productive discussions” with Tehran. The U.S. naval blockade of Iran remains in place, with roughly a dozen Navy ships in the region, The Wall Street Journal reported.

The U.S. separately increased economic pressure on Tehran on Thursday. The Treasury Department sanctioned 17 vessels it said were part of Iran’s remaining shadow fleet, vessels the Treasury said had transported millions of barrels of Iranian crude, petroleum and petrochemical products to markets in South and East Asia.

Hurricane Isaias has sharply increased disruptions to production in the Gulf of Mexico. The Marine Minerals Administration said 1.28 million barrels a day, or 62.9% of current offshore oil output, had been shut in as of Thursday morning, up from about 511,600 barrels a day the day before. Personnel had been evacuated from 121 production platforms and five drilling rigs.

Isaias had maximum sustained winds of 100 miles an hour Thursday evening as it moved toward the northern U.S. Gulf Coast, according to the National Hurricane Center. The threat to U.S. Gulf Coast refineries has narrowed despite the offshore shutdowns. Fewer than 500,000 barrels a day of refining capacity in Alabama and Mississippi was at risk of a direct hit, down from 2.5 million barrels a day expected earlier in the week, S&P Global Energy said. Port closures and shipping delays could still disrupt refined-product exports, with U.S. Gulf Coast diesel exports averaging 1.4 million barrels a day so far this week, down from 2.1 million barrels a day the previous week, S&P said.

Tensions elsewhere in the region also remain high. Iran and its Houthi allies in Yemen carried out another series of attacks Wednesday night and Thursday, including strikes targeting shipping in the Persian Gulf and Saudi Arabia, The Wall Street Journal reported.

“Oil prices are likely to remain elevated in the short term despite the pullback as risks to Middle East shipping routes persist and U.S. offshore production remains disrupted,” Hani Abuagla, senior market analyst at XTB MENA, said.