Oil back in positive territory ahead of U.S.-China trade deal

By Ron Bousso

LONDON (Reuters) – Global oil benchmark Brent crude rose to more than $64.50, recovering from four days of declines on easing Middle East tensions, as the United States and China prepared to sign a preliminary trade deal.

Brent crude gained 43 cents, or 0.7%, to $64.63 a barrel by 1507 GMT. U.S. West Texas Intermediate crude futures rose 11 cents, or 0.2%, to $58.20 a barrel.

The outlook for oil demand was supported by the expected signing of a Phase 1 U.S.-China trade deal on Wednesday, marking a major step in ending a dispute that has cut global growth and dented demand for oil.

China has pledged to buy more than $50 billion in energy supplies from the United States over the next two years, according to a source briefed on the trade deal.

The trade war between the world’s two biggest energy consumers had a tangible impact on global oil demand growth last year, said Tamas Varga, an analyst at broker PVM. Varga pointed to 2019 demand growth of 890,000 barrels per day (bpd), compared with initial forecasts of 1.5 million bpd.

“This year, however, the pace is expected to pick up again and average 1.25 million bpd … In the event of a trade deal upward revisions can be anticipated,” Varga said.

Regardless of trade wars, China’s crude oil imports in 2019 surged 9.5% from the previous year, setting a record for a 17th straight year as demand growth from new refineries propelled purchases by the world’s top importer, data showed.

However, gains were limited by easing concern over possible supply disruptions as a result of tensions in the Middle East.

The recent declines came as investors unwound bullish positions built after the killing of a senior Iranian general in a U.S. air strike on Jan. 2, which sent oil prices to a four-month high, said Harry Tchilinguirian, global oil strategist at BNP Paribas in London.

“As geopolitical tensions take a back seat for now, we may see more of the same in the short term,” Tchilinguirian told the Reuters Global Oil Forum.

Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, said his country will work for oil market stability at a time of heightened U.S.-Iranian tension.

He also said it was too early to talk about whether the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, would continue with production curbs that are due to expire in March.

Separately, U.S. crude oil inventories were expected to have fallen last week, a preliminary Reuters poll showed on Monday.

The poll was conducted ahead of reports from the American Petroleum Institute (API), an industry group, and the Energy Information Administration, an agency of the U.S. Department of Energy.

(Additional reporting By Jessica Jaganathan; Editing by Louise Heavens and David Goodman)

Team activated to support global airline safety as Middle East tensions rise

Team activated to support global airline safety as Middle East tensions rise
By Allison Lampert

MONTREAL (Reuters) – An international aviation team has been activated to support “effective coordination and communication” between airlines and countries as tensions mount in the Middle East after a U.S. drone strike killed an Iranian military commander, global airlines body IATA said on Tuesday.

Airlines and the United Nations’ aviation agency have started to monitor strategic airspace over Iran and Iraq. With some commercial carriers still serving those countries and others flying over their airspace, the International Air Transport Association also issued a statement reminding countries of their obligation to communicate potential risks to civil aviation.

“It is critical that states live up to this obligation as tensions in the Middle East rise,” the group said, days after the killing of General Qassem Soleimani on Friday plunged the region into a new crisis.

On Monday, Germany published a new warning for Iraq, indicating areas of concern for overflying traffic, according to a report published by the site OPSGROUP.

The coordination team operated by IATA and the International Civil Aviation Organization (ICAO) was activated as a “standard precautionary measure,” in the event that contingency measures are required by airlines, IATA said in a statement to Reuters.

The team brings together airlines, regulators and air navigation service providers to ensure any potential risks to aviation are shared quickly, an industry source familiar with the group said.

“Everyone’s urging restraint,” said the source who spoke on condition of anonymity because of the sensitivity of the matter.

Carriers are increasingly taking steps to uncover threats to their planes after Malaysia Airlines Flight MH17 was shot down in 2014 by a missile over Ukraine, killing all 298 people on board.

Airspace controlled by Iran and Iraq are seen as strategic for commercial aviation in the Middle East. If there were the need to shut down the airspace, carriers would have to be rerouted which would lead to greater congestion and fuel costs, said the source.

(Reporting By Allison Lampert in Montreal; Editing by David Gregorio)

Trump imposes new U.S. sanctions on Iran, including supreme leader

U.S. President Donald Trump displays an executive order imposing fresh sanctions on Iran in the Oval Office of the White House in Washington, U.S., June 24, 2019. REUTERS/Carlos Barria

By Steve Holland and Stephen Kalin

WASHINGTON/RIYADH (Reuters) – U.S. President Donald Trump imposed new U.S. sanctions on Iran on Monday following Tehran’s downing of an unmanned American drone and said the measures would target Iranian Supreme Leader Ayatollah Ali Khamenei.

Trump told reporters he was signing an executive order for the sanctions amid tensions between the United States and Iran that have grown since May, when Washington ordered all countries to halt imports of Iranian oil.

Trump also said the sanctions would have been imposed regardless of the incident over the drone. He said the supreme leaders was ultimately responsible for what Trump called “the hostile conduct of the regime.”

“Sanctions imposed through the executive order … will deny the Supreme Leader and the Supreme Leader’s office, and those closely affiliated with him and the office, access to key financial resources and support,” Trump said.

The Trump administration wants to force Tehran to open talks on its nuclear and missile programs and its activities in the region.

Iran said on Monday U.S. cyber attacks on its military had failed, as Washington sought to rally support in the Middle East and Europe for a hardline stance that has brought it to the verge of conflict with its longtime foe.

Washington has blamed Tehran for attacks on tankers in the Gulf in recent weeks, which Iran denies. On Monday, the United States said it was building a coalition with allies to protect Gulf shipping lanes.

A coalition of nations would provide both material and financial contributions to the program, a senior U.S. State Department official said, without identifying the countries.

“It’s about proactive deterrence, because the Iranians just want to go out and do what they want to do and say hey we didn’t do it. We know what they’ve done,” the official told reporters, adding that the deterrents would include cameras, binoculars and ships.

The United States accuses Iran of encouraging allies in Yemen to attack Saudi targets.

In a joint statement on Monday, the United States, Saudi Arabia, the UAE and Britain expressed concern over Middle East tensions and the dangers posed by Iranian “destabilizing activity” to peace and security in Yemen and the region.

The confrontation between Iran and the United States heated up last Thursday when Iran shot down an American drone, saying it had flown over its air space.

Washington, which said the drone was in international skies, then appeared to come close to attacking Iranian military targets, with Trump saying that he aborted a retaliatory air strike 10 minutes before it was to go ahead.

Trump said he decided the strike, to punish Iran for shooting down the drone, would have killed too many people.

U.S. media have reported that Washington launched cyber attacks last week even as Trump called off his air strike. The Washington Post said on Saturday that the cyber strikes, which had been planned previously, had disabled Iranian rocket launch systems. U.S. officials have declined to comment.

FEARS OF WAR

Iran dismissed the cyber attacks as a failure.

“They try hard, but have not carried out a successful attack,” Mohammad Javad Azari Jahromi, Iran’s minister for information and communications technology, said on Twitter.

“Media asked if the claimed cyber attacks against Iran are true,” he said. “Last year we neutralized 33 million attacks with the (national) firewall.”

Allies of the United States have been calling for steps to defuse the crisis, saying they fear a small mistake by either side could trigger war.

“We are very concerned. We don’t think either side wants a war, but we are very concerned that we could get into an accidental war and we are doing everything we can to ratchet things down,” British Foreign Secretary Jeremy Hunt said.

U.S. Secretary of State Mike Pompeo jetted to the Middle East to discuss Iran with the leaders of Saudi Arabia and the United Arab Emirates, two Gulf Arab allies that favor a hard line. Pompeo met King Salman as well as the king’s son, de facto ruler Crown Prince Mohammed bin Salman.

The U.S. special representative for Iran, Brian Hook, visited Oman and was headed to Europe to explain U.S. policy to allies. He told European reporters on a phone call ahead of his arrival that Trump was willing to sit down with Iran, but that Iran must do a deal before sanctions could be lifted.

CONCESSIONS

U.S.-Iran relations have deteriorated over the past year since the United States abandoned a 2015 agreement between Iran and world powers designed to curb Iran’s nuclear program in return for the lifting of sanctions.

U.S. allies in Europe and Asia view Trump’s decision to abandon the nuclear deal as a mistake that strengthens hardliners in Iran and weakens the pragmatic faction of President Hassan Rouhani.

France, Britain and Germany have sent an official diplomatic warning to Iran if Tehran reduces its compliance with the accord, two European diplomats said on Monday.

It was not immediately clear what consequences Iran might face for non-compliance.

Washington argues that the agreement known as the JCPOA, negotiated under Trump’s predecessor, President Barack Obama, did not go far enough, and new sanctions are needed to force Iran back to the table to make more concessions.

Both sides have suggested they are willing to hold talks while demanding the other side move first. In the latest comment from Tehran, an adviser to Rouhani repeated a longstanding demand that Washington lift sanctions before any talks.

But the adviser, Hesameddin Ashena, also tweeted a rare suggestion that Iran could be willing to discuss new concessions, if Washington were willing to put new incentives on the table that go beyond those in the deal.

“If they want something beyond the JCPOA, they should offer something beyond the JCPOA; with international guarantees.”

(Reporting by Bozorgmehr Sharafedin in London and Stephen Kalin in Jeddah; Additional reporting by Robin Emmott in Brussels; Writing by Peter Graff and Grant McCool; Editing by Jon Boyle and Howard Goller)