A statement from the US State Department demanding that all countries stop importing oil from Iran starting this November, as well as supply disruptions in Canada, has lifted oil prices.
Brent crude futures jumped 61 cents, or 0.8%, to stand at $76.92 per barrel, while US West Texas Intermediate (WTI) crude futures soared 35 cents, or 0.5%, to reach $70.88, Reuters reported.
The US announcement comes after President Donald Trump exited the 2015 Iran nuclear deal earlier this year and declared that sanctions would be enforced again.
Therefore, the latest move does not come as a surprise and is on anticipated lines.
Risk consultancy Eurasia Group was quoted by the news agency as saying: “It is very unlikely the US will succeed in ending Iranian oil sales on this timetable, but we are increasing our estimate of oil likely to come off the market by November to about 700,000 barrels per day – another bullish factor for prices.”
During the previous sanctions regime prior to the nuclear deal, the US offered waivers to several Asian countries to allow them to continue buying oil from Iran.
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However, the US is not inclined to grant waivers this time.
The rise in oil prices was also supported by production issues at Suncor Energy’s Syncrude sands facility in Canada, with production set to be suspended through next month.
Another factor causing the increase in crude prices is uncertainty over Libyan exports in the wake of power tussle between the Libyan forces and rebels.
Meanwhile, the US crude inventories dipped 9.2 million barrels in the week ending 22 June to 421.4 million barrels, according to data released by the American Petroleum Institute (API).
Last week, the Organization of the Petroleum Exporting Countries (OPEC) decided to raise supplies to address supply disruptions, with Saudi Arabia and Russia strongly supporting the move.