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Oil prices rose more than 2 per cent on Tuesday as U.S. sanctions squeezed Iranian crude exports and after U.S. crude oil production in 2019 was forecast to grow at a slower rate than previously expected, prompting supply concerns.

Since spring when the Trump Administration said it would impose sanctions on Iran, crude traders have priced in a risk premium reflecting the supply shortages that may occur when exports from the third-largest OPEC member are cut. As the Nov. 4 date for imposing sanctions draws nearer, the premium has increased.

Brent crude futures rose $1.69, or 2.2 per cent, to settle at $79.06 a barrel. U.S. West Texas Intermediate (WTI) crude settled $1.71, or 2.5 per cent, higher at $69.25 a barrel.

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Prices extended gains in post-settlement trade after industry data from the American Petroleum Institute showed U.S. crude inventories slumped 8.6 million barrels last week, versus analysts’ forecasts of a 805,000-barrel decrease.

Official U.S. government data is due to be released on Wednesday.

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 U.S. government does not want to push up oil prices, which could depress economic activity or even trigger a slowdown in global growth.

U.S. 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.

Russia, the United States and Saudi Arabia are the world’s three biggest oil producers by far, meeting around a third of the world’s almost 100 million barrels per day (bpd) of daily crude consumption.

Russian Energy Minister Alexander Novak said on Tuesday that Russia and a group of producers around the Middle East which dominate the Organization of the Petroleum Exporting Countries may sign a new long-term cooperation deal at the beginning of December, the TASS news agency reported. Novak did not provide details.

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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 per cent since then and markets significantly tighter, there has been pressure on producers to raise output.

U.S. crude production is expected to rise 840,000 barrels per day (bpd) to 11.5 million bpd next year, lower than a previous expectation for a rise of 1.02 million bpd to 11.7 million bpd, the U.S. Energy Information Administration (EIA) said in a monthly report.

“Market participants are now evaluating this development in conjunction with potential for further declines in oil output from Iran and Venezuela, which portrays a significantly bullish picture on prices,” said Abhishek Kumar, senior energy analyst at Interfax Energy in London.

On Monday several armed men attacked the headquarters of Libya’s National Oil Corporation (NOC) in the capital Tripoli on Monday.

The NOC has continued to function relatively normally amid chaos in Libya. Oil production has been hit by attacks on oil facilities and blockades, though last year it partially recovered to around one million barrels per day.

As Middle East markets tighten, Asian buyers are seeking alternative supplies, with South Korean and Japanese imports of U.S. crude hitting a record in September.

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U.S. 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.

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