Markets

Oil rises as U.S. sanctions on Iran stoke supply worries

Oil rises as U.S. sanctions on Iran stoke supply worries

It comes a day after an expert said that prices could rise to more than $90 a barrel following the fresh United States sanctions against Iran, which is the world's fifth-largest oil producer. The sanctions did not include Iran's oil exports.

The reimposed sanctions target Iran's US dollar purchases, metals trading, coal, industrial software and its auto sector.

Analysts expect the US sanctions to take between 500,000 bpd and 1 million bpd of Iranian crude oil off the market when full sanctions return in early November, and some experts think that the figure will be closer to 1 million bpd.

"Oil sanctions are next (in November), and in our view, it would be a big mistake to expect waivers in the weeks ahead based on Trump's track record on Iran", he said. With U.S. sanctions snapping back on Tuesday, however, U.S. President Donald Trump said any company working with Iran would be isolated.

Brent crude oil rose to $73.81 a barrel and West Texas Intermediate was at $69.05.

Exports to China rose to 799,452 bpd in July from 722,100 bpd in June, while Iranian oil sales to India increased by more than 40,000 bpd from June to 706,452 bpd in July, S&P Global Platts data shows.

"Anyone doing business with Iran will not be doing business with the United States", he stated through his Twitter account.

"The market continues to price in geopolitical risk from the reimposition of sanctions by the US on Iran", said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut.

Saudi Arabia Reduced Oil Production in July
Unexpected dip in Saudi output lifts oil

French bank Societe Generale said there was now a "comfortable supply" in physical crude markets, but noted "Iran sanctions will take another 1 million bpd off the markets".

That came despite a pledge by the Saudis and top producer Russian Federation in June to raise output from July, with Saudi Arabia promising a "measurable" supply boost.

Output was expected to rise 1.31 million bpd to 10.68 million bpd in 2018, lower than last month's forecast of growth of 1.44 million bpd to 10.79 million, the EIA said. Data from the American Petroleum Institute for USA inventories is due later on Tuesday at 4:30 p.m. EDT, followed by the government's report on Wednesday morning.

Platts reported that an increase in US crude oil supplies is in part behind the drain in inventories. This represents around a third of global oil demand.

This mostly impacts demand for power fuels such as thermal coal and natural gas.

Additionally, there are also reports that many USA shale oil drillers posted disappointing quarterly results in recent weeks, hit by rising operating costs, hedging losses and a drop in crude prices away from 2018 highs reached between May and July.

Also supporting prices were a weakened dollar, McGillian said.





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