Investing.com – Strong buying emerged in oil markets Tuesday as focus shifted to an expected decline in Iranian crude exports after a senior U.S. State Department official said countries must stop purchasing crude by the start of November or face sanctions.
In the New York Mercantile Exchange crude futures for August delivery rose 3.6% to settle at $70.53 a barrel, while on London's Intercontinental Exchange, Brent climbed 2.17% to trade at $76.71 a barrel.
Companies that buy Iranian crude oil must completely halt those exports by Nov. 4 or else they will face powerful U.S. sanctions, a senior State Department official told reporters on Tuesday.
Oil prices moved sharply higher as investor focus shifted to the prospect of a void in global supplies as Iran – OPEC's third largest producer – exports more than 2 million barrels per day (bpd).
U.S. President Donald Trump withdrew the United States from the 2015 Iran nuclear agreement in May, vowing to slap the "highest level of economic sanctions" on Tehran.
Renewed focus on upcoming sanctions against Iran, offset some earlier weakness in oil prices, which followed a report Saudi Arabia plans to hike crude output to record levels.
The Saudis plan to pump a record 10.8 million barrels a day, above a previous high of 10.72 million bpd seen in November 2016, Bloomberg reported, citing people briefed on the country’s output policy.
Some analysts said Saudi's plan to reportedly hike output was a sign that the de-facto OPEC leader was worried about a shortfall in supplies, at a time when global spare production was nearing record lows.
Heading into settlement, crude prices were also supported by expectations for a draw in U.S. supplies for the third week in a row.
A fresh batch of inventories data from the U.S. Energy Information Administration data due 10:30 ET Wednesday expected to show U.S. crude stockpiles fell by 2.572 million barrels last week.