Oil climbs ahead of US sanctions on Iran set for November
London — Oil prices rose on Tuesday as US sanctions squeezed Iranian crude exports, tightening global supply despite efforts by Washington to get other producers to increase output.
Benchmark Brent crude oil was up 50c at $77.87 a barrel by 7.50am GMT. US light crude was 15c higher at $67.69.
"The path of least resistance for oil prices, given the supply fundamentals, remains up," Harry Tchilinguirian, oil strategist at BNP Paribas, told Reuters Global Oil Forum.
Washington has told its allies to reduce imports of Iranian oil and several Asian buyers, including South Korea, Japan and India appear to be falling in line. But the US government does not want to push up oil prices, which could depress economic activity or even trigger a slowdown in global growth.
US energy secretary Rick Perry met Saudi energy minister Khalid al-Falih on Monday in Washington, as the Trump administration encourages big oil-producing countries to keep output high. Perry will meet with Russian energy minister Alexander Novak on Thursday in Moscow.
"Markets ... are expecting substantial price pressure as Iran sanctions loom," said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.
Russia, the US and Saudi Arabia are the world’s three biggest oil producers by far, meeting about a third of the world’s almost 100-million barrels per day (bpd) of daily crude consumption. Their combined output has risen by 3.8-million bpd since September 2014, more than the peak output Iran has managed over the last three years.
Russia’s Novak said on Tuesday that Russia and a group of producers around the Middle East which dominate oil cartel Opec may sign a new long-term co-operation deal at the beginning of December, the TASS news agency reported. Novak did not provide details.
A group of Opec and non-Opec producers have been voluntarily withholding supplies since January 2017 to tighten markets, but with crude prices up by more than 40% since then, and markets significantly tighter, there has been pressure on producers to raise output.
With Middle East crude markets also tightening, many Asian refiners are seeking alternative supplies, with South Korean and Japanese imports of US crude hitting a record in September.
US oil producers are seeking new buyers for crude they used to sell to China before orders slowed because of the trade disputes between Washington and Beijing. This is one reason that the discount for US crude compared to Brent has widened to about $10 a barrel, the biggest since June, according to traders.