Oil prices rose Monday after reports of a decline in Saudi Arabian crude oil production, and as the U.S. government began reimposing sanctions on Iran.
Light, sweet crude for September delivery ended 52 cents, or 0.8%, higher at $69.01 a barrel on the New York Mercantile Exchange. Brent crude, the global benchmark, rose 0.7% to $73.75 a barrel.
Reports on Friday 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 OPEC delegates, have “lent support” to prices, according to analysts at Commerzbank.
The potential output drop belied expectations that Saudi production would have risen in July. Russia and the Organization of the Petroleum Exporting Countries, of which Saudi Arabia is the de facto head, agreed in late June to begin ramping up crude output in July after more than a year of holding back production.
However, analysts at ING Bank noted that the potential drop in Saudi output is “different to a number of other estimates out there, with some estimating that Saudi oil production increased to as much as 10.8 million barrels a day over the month.”
OPEC is slated to release its official monthly oil-market report for July on Aug. 13.
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 prices also got a boost during the New York session when the administration of President Trump announced it was starting to reimpose sanctions on Iran by choking off its access to dollars and other measures. The move follows President Trump’s announcement in May that the U.S. was pulling out of the 2015 Iran nuclear accord.
Iran oil exports won’t actually be cut off as part of the sanctions until November. But analysts said Monday’s announcement confirmed that the U.S. government is serious about following its sanctions schedule and said investors will soon notice buyers of Iran oil making a steady move toward the exits.
Market participants will “start to react to the upcoming expiry of the wind-down period in a more widespread and visible way, and [we] expect total Iranian exports [currently near 2.5 million barrels a day] to trend down towards the 1 million barrels a day level out to the turn of the year,” said JBC Energy.
Analysts said monthly government data last week that showed U.S. oil production fell to 10.4 million barrels a day in May from 10.5 million in April is also providing price support.
“Oil production in the USA has probably reached a peak, easing the pressure from increasing production from OPEC,” said Peter Cardillo, chief market economist at Spartan Capital.
Among refined products, gasoline futures for September delivery ended virtually unchanged at $2.0651 a gallon. Diesel futures rose 0.6% to $2.1393 a gallon.