Crude-oil prices settled higher Monday on the back of a pair of factors that threaten to disrupt near-term supplies — bullish developments for futures.
On the New York Mercantile Exchange, West Texas Intermediate futures CLU8, +0.54% for September delivery rose 52 cents, or 0.8%, to settle at $69.01 a barrel. The U.S. oil benchmark finished at its highest settlement since June 29, though it pared its gains toward the close.
Brent crude for October LCOV8, +0.63% the global benchmark, was up 54 cents, or 0.7%, to end at $73.75 a barrel on London’s Intercontinental Exchange.
Reports on Friday indicated that Saudi crude production dropped to around 10.3 million barrels a day in July, down from 10.49 million barrels a day in June, according to delegates from the Organization of the Petroleum Exporting Countries, of which Saudi Arabia is the de facto head.
On top of that, President Donald Trump’s administration made good Monday on its vow to reimpose sanctions on Iran, after the White House in May pulled the U.S. out of a 2015 international agreement to curb Iran’s nuclear program.
Market participants estimate that sanctions, with some coming on line at midnight Tuesday and others being put in place over the next three months, could block more than 1 million barrels a day of Iran’s roughly 2.5 million barrels a day of crude exports.
“The two main developments that are driving today’s oil rally are data showing an unexpected dip in Saudi production last month (expectations of a rise were a headwind on prices back in early July) and renewed chatter about sanctions on Iran. Both are supply side positives and supportive of the medium term, fundamental outlook for prices,” said Tyler Richey co-editor of the Sevens Report in an emailed note to MarketWatch.
Last month, Russian crude and condensate production increased by 150,000 barrels a day month-on-month, analysts at consultancy JBC Energy said, while OPEC output rose by around 300,000 barrels a day last month.
OPEC and 10 members outside the oil cartel, including Russia, agreed in late June to begin ramping up production last month after more than a year of holding production in check.
OPEC is slated to release its official monthly oil market report for July on Aug. 13., which will offer greater clarity on output among its members.
Saudi and Russian plans to raise output have helped put a cap on prices over the past month, with Brent falling more than 8% from 3½ -year highs in the spring.
Oil market observers are looking ahead to weekly U.S. inventory data from the Energy Information Administration due on Wednesday.
Among refined products, September gasoline RBU8, -0.06% rose less than 0.1%, to $2.0651 a gallon, with prices for the contract falling 2.2% last week, while September heating oil HOU8, +0.56% added 1.2 cents, or 0.6%, to $2.139 a gallon.
September natural gas NGU18, +0.14% picked up seven-tenths of a cent, or 0.3%, to $2.860 per million British thermal units, notching its highest close since July 3 for a most-active contract.
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