Oil up on news of sudden drop in Saudi crude output
New York — Oil futures rose on Monday after Opec sources said Saudi crude production unexpectedly fell in July, raising concerns about global oil supplies as the US prepares to reinstate sanctions against major exporter Iran.
Brent crude futures rose 94c to $74.15 a barrel, a 1.3% gain, by 3.25pm GMT.
US West Texas Intermediate crude futures rose $1.23 to $69.72 a barrel, a 1.8% gain.
Saudi Arabia pumped about 10.29-million barrels a day of crude in July, two Opec sources said on Friday, down about 200,000 barrels a day from a month earlier.
That came despite a pledge by the Saudis and top producer Russia in June to raise output from July, with Saudi Arabia promising a "measurable" supply boost.
"The Saudis are reining in production gains in an attempt to maintain Brent pricing" at between $70 and $75 a barrel, Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
US investment bank Jefferies said in a note that "the Saudi and Russian production surges appear to be more limited" than expected, adding that the imminent reinstatement of US sanctions against Iran also fed bullish sentiment.
Washington is due to reinstate some sanctions against Iran that it suspended after a 2015 deal between world powers and Tehran that sought to curb Iran’s nuclear programme.
Some of the sanctions will come back on Tuesday at 4.01am GMT. The US also plans to re-introduce sanctions on Iranian oil in November, which could dent the Opec member’s output.
Renewed sanctions are part of Trump administration’s strategy to deny resources to the Iranian leadership.
Washington wanted as many countries as possible to cut imports of Iranian oil to zero, a senior US administration official said in a telephone press briefing.
Most Iranian crude exports go to China and India, but roughly 20% go to Europe, where refiners have already cut their purchases.
Meanwhile, US energy companies last week cut oil rigs for a second time in the past three weeks as the rate of growth has slowed over the past couple of months.
Oil prices "may also be finding support from oil transport infrastructural problems in the US," said Commerzbank analysts in a note.
"Admittedly, oil production there is surging from one record high to the next. However, low pipeline capacities in particular are preventing any more pronounced increases, and are delaying the rebalancing of global supply and demand."