Economy

Oil Prices Rise As US Sanctions On Iran Tightens Market

Oil Prices Rise As US Sanctions On Iran Tightens Market

Benchmark Brent crude oil was up 10 cents at $72.91 a barrel by 0930 GMT. Yet, bullish sentiment found some support from expectations that looming US sanctions against Iran could significantly hamper its crude exports.

Oil prices moved sharply lower on Monday after data suggested inventories at the US crude delivery hub rose in the latest week, compounding worries that troubled emerging markets and trade tensions will dent the outlook for fuel demand.

West Texas Intermediate crude for September delivery slid $1.53 to $66.10 (R928.95) a barrel at 12.12pm on the New York Mercantile Exchange. Analysts say it has already hit several emerging market currencies, including the South African rand, Russian ruble, and Mexican peso.

Signs of slowing economic growth and lower fuel demand increases, especially in Asia's large emerging markets are weighing on the oil markets.

"The energy complex is being increasingly jostled by fresh daily headlines that don't necessarily have much effect on current supply or demand on a short term basis but could dramatically affect oil balances when looking down the road just a few months", he said.

Hedge funds and other money managers reduced their bullish positions in US crude futures and options in the week ending on August 7, data from the US Commodity Futures Trading Commission showed on Friday. Meanwhile, Opec raised production in July, with increases in output from Kuwait, Nigeria and the United Arab Emirates.

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The International Energy Agency (IEA) said last week that global oil supply could become "very challenging" when US sanctions on Iran return, but "trade tensions might escalate and lead to slower economic growth, and in turn lower oil demand".

The United States has started implementing new sanctions against Iran, which from November will also target the country's petroleum sector.

That was the highest level of drilling activity since March 2015.

OPEC's output averaged 32.32 million barrels per day in July, up 41,000bpd from June, the group said in its monthly oil market report, citing secondary source figures.

Global oil demand is rising, but not as fast as supply.

Oil's losses were capped by concerns over lower global crude supply from top producers. Brent, the global benchmark, shed 0.3% to $72.74 a barrel.