Oil rises as U.S. sanctions on Iran stoke supply worries

Saudi Arabia Reduced Oil Production in July

Oil firm

The new USA sanctions will likely slash oil supply.

An even bigger surprise can come from Washington later today regarding the Iranian sanctions.

"Anyone doing business with Iran will not be doing business with the United States", he stated through his Twitter account. "I am asking for WORLD PEACE, nothing less!"

The WTI Crude Oil market tried to rally again during the day on Tuesday, but just like the Monday session we ended up finding sellers close to the $70 level again and rolled over.

"Saudi Arabia knows that the USA really does want to see maximum impact from sanctions towards Iran, which means that they want to prepare all buyers of Iranian crude to say 'there is plenty of oil in the market and don't be afraid to pull back on Iran (purchases)", said Bjarne Schieldrop, head of commodities strategy at SEB.

The Iran sanctions have officially been cast.

French bank Societe Generale said there was now a "comfortable supply" in physical crude markets, but noted "Iran sanctions will take another 1 million bpd off the markets".

Mr Trump's sanctions follow the withdrawal of the United States from the Iran nuclear deal earlier this year. With U.S. sanctions snapping back on Tuesday, however, U.S. President Donald Trump said any company working with Iran would be isolated.

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He said: "People are unhappy with some of the policies - the economic policies - that have been pursued over the past few months by the Rouhani administration, but I think there is universal hostility towards Trump because he is waging economic warfare against Iran".

"The US seems hell-bent on regime change in Iran", said Greg McKenna, chief market strategist at futures brokerage AxiTrader. "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 Russian Federation to raise output from July, with Saudi Arabia promising a "measurable" supply boost.

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. US Eastern time (0401 GMT) on Tuesday.

Also supporting prices were a weakened dollar, McGillian said. This represents around a third of global oil demand.

This mostly affects demand for power fuels such as thermal coal and natural gas.

"Past instances of El Niño have resulted in sharp drops in USA residential and commercial heating oil demand and prices", it said.

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