Skip to main content

Oil prices rose on Tuesday after U.S. sanctions on Iranian goods went into effect, intensifying concerns that sanctions on Iranian oil, expected in November, could cause supply shortages.

Renewed U.S. sanctions against OPEC member Iran officially went into effect at 12:01 a.m. EDT. The sanctions did not include Iran’s oil exports. The country exported almost 3 million barrels per day (bpd) of crude in July.

The sanctions target Iran’s U.S. dollar purchases, metals trading, coal, industrial software and its auto sector.

Story continues below advertisement

U.S. sanctions on Iran’s energy sector are set to be re-imposed after a 180-day “wind-down period” ending on Nov. 4.

“It certainly is a reminder to everyone that the U.S. is serious about sanctions, and it’s doubtful they will grant waivers,” said John Kilduff, partner at Again Capital Management in New York.

Brent futures rose 90 cents, or 1.2 per cent, to settle at $74.65 a barrel, after hitting a session high of $74.90.

U.S. West Texas Intermediate (WTI) crude futures settled 16 cents, or 0.2 per cent, higher at $69.17 a barrel, down from an earlier high of $69.83.

Oil prices rose after the sanctions went into affect, 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.

WTI faced further resistance, he said, amid a reported uptick in U.S. imports of Saudi oil.

U.S. President Donald Trump tweeted that the sanctions were “the most biting sanctions ever imposed.”

Story continues below advertisement

“Anyone doing business with Iran will NOT be doing business with the United States,” he added.

Many European countries, China and India, oppose the sanctions, but the U.S. government said it wants as many countries as possible to stop buying Iranian oil.

Iraqi Prime Minister Haider al-Abadi said his country opposes sanctions on Iran, but will abide by them to protect its own interests.

“The market continues to price in geopolitical risk from the reimposition of sanctions by the U.S. on Iran,” said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut. “The reports that Saudi Arabia’s production actually dropped in July continue to provide support for the market.”

Saudi Arabia’s crude production dropped about 200,000 bpd last month, two sources at the Organization of the Petroleum Exporting Countries said on Friday, despite a pledge by the Saudis and top producer Russia to raise output from July, with Saudi Arabia promising a “measurable” supply boost.

Meanwhile, U.S. crude production, which has climbed dramatically fueled largely by increased output from shale formations, may now rise more slowly as prices drop, according to the U.S. Energy Information Administration’s monthly report.

Story continues below advertisement

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.

“We continue to expect Brent crude oil spot prices to fall towards $70 per barrel by the end of 2018, as the market appears to be fairly balanced in the coming months,” said Linda Capuano, EIA Administrator.

U.S. crude stockpiles were expected to have dropped 3.3 million barrels last week. Weekly data from the American Petroleum Institute for U.S. inventories is due later on Tuesday at 4:30 p.m. EDT, followed by the EIA’s report on Wednesday morning.

Report an error
Tickers mentioned in this story
Unchecking box will stop auto data updates
Comments

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • All comments will be reviewed by one or more moderators before being posted to the site. This should only take a few moments.
  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed. Commenters who repeatedly violate community guidelines may be suspended, causing them to temporarily lose their ability to engage with comments.

Read our community guidelines here

Discussion loading ...

Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.
Cannabis pro newsletter