Crude futures pared earlier declines and settled higher Thursday, in a late-day boost prompted by news that the US unleashed a new wave of sanctions against Iran.
NYMEX August crude futures settled 27 cents higher at $86.08/barrel, off a session low of $84.21/b.
ICE August crude settled 87 cents higher at $101.07/b, breaking to upside after trading below Wednesday's close for most of the session.
The US added sanctions on Iran, pointing to its "nuclear and missile proliferation activities" and citing "front companies involved in Iran's oil trade," the Treasury Department said Thursday. Also, a shipping line in the United Arab Emirates, plus 57 individual crude oil tankers and similar vessels, were identified Thursday by Treasury as being affiliated with the government of Iran.
Treasury said the vessels were renamed to hide their affiliation with the already sanctioned Islamic Republic of Iran Shipping Line. The UAE company, Good Luck Shipping, was named "because it acts or purports to act for or on behalf of IRISL," Treasury said.
The US and EU have implemented an oil embargo against Iran, leading to a substantial decline in exports of crude from the Islamic republic. The Western powers allege that Iran is pursuing development of nuclear weapons, but Iran maintains its nuclear program is aimed at generating electricity.
Tom Pawlicki, director of market research at EOX Live, said the Iran news boosted crude futures after technical levels for NYMEX front-month crude were negative for most of the session.
"We are on a bearish reversal since July 5 and I thought it was correcting to $81 but now we are seeing a turnaround," Pawlicki said.
Product prices followed gains in Brent with NYMEX August heating oil settling up 1.15 cents at $2.7733/gal and August RBOB ending 3.73 cents higher at $2.8062/gal.
In RBOB, the backwardation in the August/September spread steepened further on Thursday to more than 14 cents/gal during the session. It then settled at 13.73 cents/gal, from 12.67 cents/gal the day before.
The backwardation in RBOB pushed out to more than 14 cents/gal on June 25 and has settled between 8-13 cents/gal since then.
Earlier in the day, oil futures fell in line with sagging global equities and a stronger dollar after South Korea surprised traders by cutting interest rates for the first time in over three years and on reports that showed that eurozone industrial production sank once again in May, said Addison Armstrong of Tradition Energy in a note.
Armstrong added that those factors caused concerns about future demand for oil just a day after both the IEA and OPEC issued "dour" forecasts for consumption growth.
The oil market had little reaction to a 26,000 decrease in US weekly jobless claims to 350,000 for the week to July 7.
The four-week moving average was 376,500, a decrease of 9,750 from the previous week's revised average of 386,250, according to the US Department of Labor.
