Oil prices rise after United States renews sanctions against Iran

Oil prices rise after United States renews sanctions against Iran

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

The Asian country buys roughly 11% of Iranian crude exports, and because of the threat of secondary sanctions, it's reportedly looking for alternative supplies.

"The US is pursuing a strategy to aggressively curb Iranian oil exports by November", UBS analysts led by Giovanni Staunovo wrote in a note.

The US government brought a string of new sanctions against Iran on Tuesday, aiming at Iran's purchases of US dollars - in which oil has always been traded - metals trading, industrial software, coal, and its automobile industry. China, which is already in the midst of a trade tirade with Washington has refuted the United States sanctions on Iran.

The US, which in May pulled out of a landmark nuclear deal and said sanctions will be re-imposed on Iran within 180 days, has threatened to cut off access to the American banking system for foreign financial institutions that trade with Tehran.

Oil was trading at $74 per barrel of Brent benchmark, while the US West Texas Intermediate stood at $69.77 on Monday. Many analysts have said that this time, the negative impact on Iranian oil trade will be less significant, and Iran will lose only half of the previous loss.

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

"Gasoline demand has been one of the main bullish stories in the oil market and if that demand is slipping off a little bit, maybe we're seeing reluctance to higher prices", says Phil Flynn of Price Futures Group.

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Shipments into the world's biggest importer of crude came in at 36.02-million tonnes last month, or 8.48-million barrels per day (bpd), rising from 8.18-million bpd a year earlier and just up on June's 8.36-million bpd, customs data showed.

The Energy Information Administration is scheduled to release the data on USA crude stockpiles, at 10:30 AM ET on Wednesday.

In terms of production, the EIA on Tuesday slightly cut its 2018 expectation for average 2018 USA crude output to 10.69 million bpd, down from its previous estimate of 10.79 million bpd.

The U.S. sanctions targeting the Iranian oil industry will be effective on November 5, but Stratas believes "South Korea remains a potentially significant opportunity for American crude exports".

Front-month Brent crude oil futures were down 67 cents at $73.98 a barrel by 1300 GMT. Nationwide inventories in the United States probably fell 3 million barrels last week, according to a Bloomberg survey of analysts before government data due on Wednesday.

Analysts also warned that a global heatwave could affect oil demand.

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