Oil futures looked to extend their gains to a third session in a row, with global crude prices notching new four-year highs and the U.S. benchmark oil trading near a three-month peak.
Oil prices were “inching higher with the market still turning a nervous eye towards Iranian production losses,” said Robbie Fraser, commodity analyst at Schneider Electric, in a daily note. “While official U.S. sanctions against Iranian oil exports are still just over a month away, Iran’s exports have already declined by at least 30% according to multiple estimates, as foreign buyers look elsewhere to source oil.”
November West Texas Intermediate crude CLX8, +2.02% the U.S. benchmark, climbed 23 cents, or 0.3%, to $73.48 a barrel on the New York Mercantile Exchange, the highest since mid July 10. December Brent crude LCOZ8, +1.91% rose 44 cents, or 0.5%, lifting the global benchmark to $83.17 a barrel on the ICE Futures Europe exchange. It was set to end at its highest level since November 2014, according to FactSet data.
Monday’s moves come after Brent crude posted a weekly gain of 5%, based on the front-month contract, while WTI oil saw a weekly climb of 3.5%, according to Dow Jones Market Data. For the month, Brent advanced 6.8%, while the U.S. contract returned 4.9% in September.
However, based on the settlement of $74.15 for the front-month contract at the end of June, WTI ended down 1.2% for the three-month period ended last week, while Brent booked a quarterly gain of 4.1%.
Crude’s rally over the past few months have been buoyed by declining Iranian crude exports ahead of U.S. economic sanctions against the Islamic Republic’s oil industry, set to take effect Nov. 4, analysts say.
Officials at the state-run National Iranian Oil Co. have said they provisionally expect crude shipments to have dropped to about 1.5 million barrels a day this month, compared with 2.3 million barrels a day in June, according to people familiar with the matter.
With the fall in Iranian exports “expected to accelerate in the months ahead, the market turns to spare capacity in order to maintain market balance, which means a heavy focus on both the U.S. and Saudi Arabia,” said Fraser.
On Friday, however, Baker Hughes reported a second straight weekly decline in active U.S. rigs drilling for oil, hinting at a decline in oil output activity.
Still, prices on saw a sudden jump with some market participants partly attributing the moves to support from reports that China is cutting back on Iranian oil purchases.
“Brent crude oil traded to a four-year high of [$]82.87 on Friday after it was announced that China Sinopec was cutting its imports of Iranian oil by half because of pressure from the U.S.,” wrote Robert Yawger, director of energy at Mizuho Securities USA in a Monday research note.
President Donald Trump in May pulled the U.S. out of a 2015 international agreement to curb Iran’s nuclear program, setting the stage for the reimposition of economic sanctions in early November.
Meanwhile, investors were eyeing developments in trade relations, with the U.S. and Canada reaching a deal to revise the North American Free Trade Agreement. Trade tensions, industry participants fret, could have a detrimental impact on oil demand.
Back on Nymex Monday, November gasoline RBX8, +1.37% added 0.5% to $2.096 a gallon and November heating oil HOX8, +1.81% rose 0.7% to $2.366 a gallon.
November natural gas NGX18, +2.83% traded at $3.08 per million British thermal units, up 2.4%.
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