Trump calls attack on US drone a mistake by Iran, oil prices rise

4 weeks ago DieselGasoil Comments Off on Trump calls attack on US drone a mistake by Iran, oil prices rise

Washington —
President Donald Trump called reports of Iran shooting down an unarmed, unmanned drone over the Gulf of Oman, a “mistake,” but offered little insight Thursday into what, if any, the US response would be as oil prices climbed on news of further provocation between the two nations.

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“Iran made a very big mistake,” Trump said after a meeting with his top national security advisers. “We didn’t have a man or woman in the drone. It would have made a big, big difference.”

When asked by reporters on a US response, Trump said: “Let’s see what happens,” cautioning that he was not being pushed to war by advisers.

“But this is a new wrinkle, a new fly in the ointment what happened, shooting down a drone,” Trump said. “And this country will not stand for it, that I can tell you.”

Iranian officials claim the drone had crossed into its territory while the US maintains it was in international airspace.

Crude futures stepped higher in midmorning trading Thursday after Trump’s initial response to the drone attack.

“Iran made a very big mistake!” Trump said on Twitter Thursday morning.

WTI jumped more than $1 to an intraday high $57.02/b immediately following Trump’s comment, while August Brent peaked at $64.78/b. Later, both contracts pulled back from these highs.

At 1656 GMT, ICE August Brent was up $2.32 at $64.14/b and NYMEX July WTI rose $2.82 to $56.58/b.

“If the US has a maximum pressure policy, Iran is now implementing a maximum chaos plan with the objective that higher oil prices and threat of military conflict make the US and Trump rethink its policy,” Joe McMonigle, an energy policy analyst with Hedgeye, said Thursday in a note. “Specifically, Iran believes higher oil prices will hurt Trump politically and may impact his decisions on increasing the pressure or even perhaps to revisit waivers.”

In a statement Thursday, Bill Urban, a US Central Command spokesman, said the drone was shot down 11:35 pm GMT Wednesday while operating in international airspace over the Strait of Hormuz.

“Iranian reports that the aircraft was over Iran are false,” Urban said. “This was an unprovoked attack on a US surveillance asset in international airspace.”

The US withdrew from the Joint Comprehensive Plan of Action nuclear deal with Iran in November and re-imposed sanctions aimed at bringing Iranian oil exports to zero, allowing waivers for Iran’s biggest crude and condensate buyers to expire in May.

Two oil tankers were attacked last week just outside the Strait of Hormuz, with the US, UK and Saudi Arabia blaming Iran. A similar attack off the eastern UAE port of Fujairah occurred a month earlier. Iran, which previously threatened to shut down traffic through the strait if US sanctions blocked its oil exports, has denied responsibility.

Iranian crude oil and condensate exports, which averaged about 1.7 million b/d in March, fell to about 1 million b/d in April and an estimated 800,0000 b/d in May, according to cFlow, Platts trade flow software data and shipping sources. The majority of those flows in May were to China, Turkey, and Syria, according to these sources.

Several analysts believe Iranian crude and condensate exports will fall to about 500,000 b/d in June.

The State Department said Wednesday that Brian Hook, its special representative for Iran, would hold bilateral meetings this week in Saudi Arabia, the UAE, Kuwait, Oman, and Bahrain to discuss Iran’s “regional aggression, including its recent attacks on two oil tankers in the Gulf of Oman.”

— Brian Scheid, brian.scheid@spglobal.com

— Chris van Moessner, christopher.vanmoessner@spglobal.com

— Edited by Valarie Jackson, newsdesk@spglobal.com