New York — Crude futures settled higher Tuesday on the return of US sanctions on Iran.
October ICE Brent settled 90 cents higher at $74.65/b, while September NYMEX crude settled 16 cents higher at $69.17/b.
US sanctions on Iran have officially restarted -- including on the purchase of US bank notes, gold, and other commercial goods -- although not as yet on oil.
According to analysts, the market is concerned about the ripple effects of the upcoming oil-specific sanctions which begin on November 4, including whether major importers of Iranian crude will begin cutting their purchases this month.
"The big question is, how many barrels are we going to lose in August before the oil-sector specific sanctions are imposed in November?" said Harry Tchilinguirian, an analyst at BNP Paribas in London.
That includes whether China will follow suit in cutting back Iranian imports, or whether it will take the opportunity to soak up further Iranian barrels.
Iranian exports fell to their lowest in four months in July, as key buyers have started to curtail purchases. Exports to both China and India increased in July, however.
The November 4 sanctions are expected to cut about 1 million b/d out of the global supply chain. However, diplomats continue to discuss waivers for some importing countries, a senior US administration official said Monday.
Iranian President Hassan Rouhani said Monday that Iran would negotiate with the US, although not under the shadow of sanctions.
"Obviously the response from Iran was slightly softer than what they were saying a couple months ago, as you would expect because now they've got to see what they can do about negotiations," said George Wilkes, an analyst at Sucden.
Also supportive was news that Saudi Arabia produced 10.29 million b/d in July. That was below the 10.49 million b/d produced in June and below the 11 million b/d level the country signaled it was able to produce at the June 23 OPEC meeting.
Still, the July production figure was at odds with several independent assessments, including Platts' 10.63 million b/d estimate.
Other OPEC members have boosted output. Nigeria's oil prodution climbed by more than 70,000 b/d to 1.97 million b/d in July, the country's oil minister said Tuesday. And Libya's Mellitah and El Sharara crudes are returning to the market, with full loading schedules planned for August, sources said Tuesday.
In refined products, September NYMEX ULSD settled 2.98 cents higher at $2.1691/gal, while September NYMEX RBOB settled 3.89 cents higher at $2.1040/gal.
