Oil prices rose today following an unexpected drop in Saudi crude production in July and a slowdown in US drilling.
The price, however, is still nearly 10% below levels of more than $80 per barrel that it touched earlier this year, reported Reuters.
Markets also expected an announcement from Washington later today on renewed US sanctions against Iran.
Two OPEC sources said that Saudi Arabia produced around 10.29 million barrels per day (bpd) of crude in July, which is a drop of around 200,000 bpd from June.
This fall in output came despite Saudi crude production and Russia crude production expected to rise from June to July.
Brent crude oil futures increased 31 cents to touch $73.52 a barrel while US futures increased 35 cents to $68.84 barrel.
SEB Group commodities strategy head Bjarne Schieldrop said: “Saudi Arabia knows that the US really does want to see maximum impact from sanctions towards Iran, which means that they want to prepare all buyers of Iranian crude to say ‘there is plenty of oil in the market and don’t be afraid to pull back on Iran (purchases).”
According to Schieldrop, it is not about flooding the market with oil and dragging the price down to the $50’s, but rather it is about getting the market prepared and ease the transition. A spokesperson for Schieldrop said: “There is no wish from Saudi Arabia to push prices down to $50.”
India and China consume the most Iranian crude, while around 20% of it is consumed by Europe, where refiners have started reducing their purchases.
Last week, Saudi Arabia reduced its official selling prices for Asian customers to a four-month low.
The 10 million to 11 million bpd of crude production from just three countries – Russia, US, and Saudi Arabia – currently meets around one-third of global oil market.
Last week, US energy companies reduced oil rigs for the second time in the last three weeks as the rate of growth slowed down during the last couple of months.
Baker Hughes energy services firm stated that US drillers reduced cut two oil rigs last week, taking the total count down to 859.