The rhetoric is running high as President Donald Trump continues his hard line on Iran. It seems that Iran’s President Hassan Rouhani took exception to that fact that the Trump administration wants to reduce Iran’s oil exports to zero. Rouhani said that “America should know that peace with Iran is the mother of all peace, and war with Iran is the mother of all wars.

You are not in a position to incite the Iranian nation against Iran’s security and interests.” Iranian General Kioumars Heydari took it a step further by stating that The Strait of Hormuz region must either be safe for all or be insecure for everyone.” In other words, if the US imposes sanction then they will start disrupting International passage in the world's most important chokepoint, with an oil flow of 17 million b/d in 2015, about 30% of all seaborne-traded crude oil and other liquids during the year. In 2016, total flows through the Strait of Hormuz increased to a record high of 18.5 million b/d according to the EIA.

President Trump did not take well to the threat. He tweeted:

To Iranian President Rouhani: NEVER, EVER THREATEN THE UNITED STATES AGAIN OR YOU WILL SUFFER CONSEQUENCES THE LIKES OF WHICH FEW THROUGHOUT HISTORY HAVE EVER SUFFERED BEFORE. WE ARE NO LONGER A COUNTRY THAT WILL STAND FOR YOUR DEMENTED WORDS OF VIOLENCE & DEATH. BE CAUTIOUS!

— Donald J. Trump (@realDonaldTrump) July 23, 2018

Oil is reacting and is starting to rally. This, along with the fact that we should see a big drop in U.S. crude supply is lending support. Cowen Co. Is reporting that Cushing Crude supplies have fallen 1.457 million barrels from July 13th till July 20th.

Internationally, Reuters is reporting that Total's North Sea oil platforms were hit by a 24-hour strike. Reuters reported the strike began at 0500 GMT, said Unite, Britain’s largest labor union. Unite and Total, which operates the platforms, earlier failed to agree over work shifts and pay, a union spokesman said. The fields account for about 10 percent of Britain’s gas output, while their oil production contributes about 45,000 to 50,000 barrels per day (bpd) to the Forties and Brent Blend crude streams. The forties and Brent Blend are key oil grades used to set the dated Brent benchmark that prices over half of the world’s oil trades.

China is unlikely to build its commercial stocks of crude oil in the second half of 2018 as refiners prefer to keep their inventory low for daily operation amid price volatility, analysts said last week.

The Energy Information Administration is reporting that Venezuelan oil production will fall below 1 million b/d by the end of this year and fall further to 700,000 b/d by the end of 2019.

The market with a touch on new geopolitical risks will have the market focus on tightening supply. Risk premium will have to rise as the loss of oil anywhere on the globe at this point will not be easily made up. Look to get hedged ahead of any new supply disruptions.

Andrew Weissman of ECB Analytics writes Natural gas’ slide lower halted temporarily on Thursday after EIA reported a much smaller-than-expected 46-Bcf weekly injection — 11 Bcf below consensus. Notably, even with this huge miss, the August gas contract peaked well below resistance at $2.80/MMBtu. Sunday’s weather forecast trended cooler in the 6-10 and 11-15-day windows. If this forecast holds Monday, natural gas is likely to head lower. Bets by traders hoping for another bullish Weekly Storage Report, however, could limit declines early in the week.