Oil futures headed higher on Tuesday, set for a fourth straight gain as investors watched U.S. sanctions against Iran for the potential to disrupt global supplies.
West Texas Intermediate crude for September delivery CLV8, +1.18% which expires at the end of the session, was up $1.17, or 1.8%, at $67.60 a barrel on the New York Mercantile Exchange. The soon-to-be front-month contract, October WTI CLV8, +1.18% tacked on 70 cents, or 1.1%, to $66.12 a barrel.
Market participants have said the price spread of more than $1 a barrel between the September and October contracts would be a focus by traders, setting the stage for some volatility in WTI as it unwinds.
“This is going to be an ugly expiration, though it might be a bit of a challenge to surpass the August expiration,” wrote Robert Yawger, director of energy at Mizuho USA.
October Brent crude LCOV8, +0.68% the global benchmark, climbed 51 cents, or 0.7%, to $72.72 a barrel on the ICE Futures Europe exchange.
Both the global and U.S. benchmarks were set to post a fourth straight gain, based on the front-month contracts. A four-day rise for WTI would match its longest rally since a similar advance ended July 20, according to FactSet data.
U.S. sanctions on Iran specifically targeting oil are due to come into full force in November, and analysts said it remains unclear exactly what volume of Iranian oil would be removed from the market. President Donald Trump in May pulled the U.S. out of a 2015 international agreement to curb Iran’s nuclear program. Some other sanctions took effect this month.
Industry experts estimate that the impact of lost Iran oil on the market would amount to 1 million to 1.5 million barrels a day. Europe, Japan, South Korea and India are anticipated to cut their Iranian imports.
Turkey and China, which are both embroiled in political and trade clashes with the U.S., are harder to factor. Turkey is a major conduit for oil in the Middle East while China is one of the world’s biggest importers of crude.
On Monday, Iranian Oil Minister Bijan Zanganeh said France’s Total TOT, +1.48% has left a natural-gas project in Iran’s South Pars field.
Separately, investors are paying attention to fraught negotiations between Beijing and Washington to end their protracted tariff clash, which market participants fear could roil global markets and accelerate an economic slowdown in China—bearish factors for oil demand should they manifest. Talks between the U.S. and China set to resume on Wednesday, but President Trump has said in a Reuters interview that he has low expectations for a resolution. The U.S. is scheduled to implement some additional tariffs on Chinese goods on Thursday.
“Fundamentally there have been three headwinds on the market: 1) trade angst weighing on demand expectations, 2) fears that Saudi Arabia will more aggressively act to regain market share since the policy change in June, and 3) still steadily rising U.S. production,” Tyler Richey, co-editor of the Sevens Report, told MarketWatch. “The first of those three has seen some relief so far this week and that has helped oil bounce so far this week with other risk assets.”
Looking ahead, energy investors will be on the look out for weekly inventory data from the American Petroleum Institute later Tuesday and the U.S. government early Wednesday. Analysts, on average, expect the EIA to report a decline of about 3.4 million barrels in last week’s crude stocks, according to an S&P Global Platts survey. They also expect a weekly fall of 400,000 barrels in gasoline supplies, but distillates are seen up by 2 million barrels.
On Monday, the Energy Department announced a notice of sale of 11 million barrels of crude oil from the Strategic Petroleum Reserve, which is part of a previously planned sales.
Elsewhere on Nymex, September natural gas NGU18, +0.75% rose 3 cents, or 1.1% at $2.972 per million British thermal units. September gasoline RBU8, +0.25% added a penny, or 0.6%, to reach $2.026 a gallon and September heating oil HOU8, +0.94% tacked on 0.4% to $2.121 a gallon.
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