Oil rises as US sanctions on Iran stir supply worries

Oil rises as US sanctions on Iran stir supply worries

Oil rises as US sanctions on Iran stir supply worries

Brent crude futures LCOc1 rose 66 cents, or almost 1 percent, to $74.41 per barrel by 12:20 p.m. EDT and U.S. West Texas Intermediate (WTI) crude futures CLc1 were up 27 cents at $69.28 a barrel.

Meanwhile, heatwave across Europe and other areas pushes oil up. However, Russia, the United States and the Saudi's are still producing 10 million to 11 million bpd of crude.

Oil prices rose on Tuesday ahead of the introduction of U.S. sanctions against major crude exporter Iran. U.S. West Texas Intermediate (WTI) crude futures CLc1 were up 29 cents at $69.30 a barrel, down from am earlier high of $69.83.

USA investment bank Jefferies said in a note that "the Saudi and Russian production surges appear to be more limited" than initially expected, adding that bullish market sentiment was also fuelled by the imminent reinstatement of U.S. sanctions against Iran.

"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 knows that the U.S. really does want to see maximum impact from sanctions towards Iran, which means that they want to prepare all buyers of Iranian crude to say 'there is plenty of oil in the market and don't be afraid to pull back on Iran (purchases)", said Bjarne Schieldrop, head of commodities strategy at SEB. "The reports that Saudi Arabia's production actually dropped in July continue to provide support for the market".

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The main oil market price drivers of recent months have been output levels by top producers Russia, Saudi Arabia and the United States, renewed Iran sanctions, the US-China trade dispute, and unplanned supply disruptions.

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.

Also supporting prices were a weakened dollar, McGillian said. US Eastern time (0401 GMT) on Tuesday.

Europe-which as a whole has been Iran's third-biggest single customer-saw imports drop to 465,450 bpd last month from 485,768 bpd in June, with demand from France, Spain, and Turkey down and purchases from Italy and Greece steadily up.

Still, with Russian Federation, the United States and Saudi Arabia now all producing 10 million to 11 million bpd of crude, just three countries now meet around a third of global oil demand.

Much of the northern hemisphere has been gripped by extreme heat this summer, pushing up demand for industrial and residential cooling.

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