Oil rises as USA sanctions on Iran stir supply worries

A man pumps gas into his car at a gas station in Caracas

Oil pumps are seen at sunset outside Vaudoy-en-Brie, near Paris, France April 23, 2018.

Oil prices rose earlier in the trading session after the US sanctions on Iran went into effect, but gains were limited as market participants lacked clear signs on just how much the proposed oil sanctions would affect Iranian crude output, Kilduff said.

European officials have said their governments are considering opening accounts for Iran at their national banks, which could receive oil payments. However, it is rumored to be new sanctions on Iran.

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

At 0244 GMT, September WTI crude oil futures are trading $68.81, up $0.32 or +0.47% and October Brent crude oil is at $73.58, up $0.37 or +0.51%.

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

US sanctions on Iran's energy sector are set to be re-imposed after a 180-day "wind-down period" ending on November 4.

West Texas Intermediate crude jumped 0.9% to $69.50 per barrel at 10:30 a.m. ET.

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"It is a reality check that this is happening and that Iran's oil exports will be hurt when the oil sanctions hit it in November", chief commodities analyst at Commerzbank Bjarne Schieldrop said.

"You can not order 2 million barrels like ordering a coffee somewhere", Beat Wittmann, a partner at financial consultancy Porta Advisors, told CNBC recently.

WTI had pierced 69 the figure again with a high so far of $69.15bbls.

"Anyone doing business with Iran will NOT be doing business with the United States".

Donald Trump described the new sanctions as "biting" and warned other countries not to do business with Iran in a post on Twitter today. The Saudi production data came as surprise to traders at the start of this week, presuming that Saudi production would have risen in July given the pledges from Russian Federation and the Organization of the Petroleum Exporting Countries where they had supposedly agreed in late June to begin ramping up crude output after more than twelve months of curbing output. "The reports that Saudi Arabia's production actually dropped in July continue to provide support for the market". 9 million bpd this week, based on weekly estimates provided by the EIA.

Traders will now look ahead to the weekly API's Weekly Statistical Bulletin today and then the USA inventory data from the Energy Information Administration.

"Past instances of El Niño have resulted in sharp drops in US residential and commercial heating oil demand and prices", it said.

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