Crude oil price on Tuesday rose to over $78 per barrel as United States sanctions squeezed Iranian crude exports, tightening global supply despite efforts by Washington to get other producers to increase output.
While the global benchmark, Brent crude futures rose $1.13 to $78.50 a barrel, representing a 1.5 per cent gain, the United States West Texas Intermediate (WTI) crude gained $1.10, or 1.6 per cent, at $68.64 a barrel.
Washington has told its allies to reduce imports of Iranian oil and several Asian buyers, including South Korea, Japan and India appear to be falling in line.
Trump had pulled the US out of an international accord under which Tehran had agreed to limit its nuclear development in exchange for sanctions relief.
Trump reintroduced sanctions and Washington later told countries they must stop buying Iran’s oil from November 4 or face financial consequences.
The US Ambassador to Germany had also called on Berlin to block an Iranian bid to withdraw large sums of cash from bank accounts in Germany.
The reduced imports of Iranian oil will reduce inventory in the global market and lead to a rise in prices, hence the push by US for other producing countries to increase supply to the market.
Reuters reported that the US government does not want to push up oil prices, which could depress economic activity or even trigger a slowdown in global growth.
US Energy Secretary, Rick Perry, met Saudi’s Energy Minister, Khalid al-Falih, on Monday in Washington, as the President Donald Trump administration encourages big oil-producing countries to keep output high.
Perry will meet with Russian Energy Minister, Alexander Novak, on Thursday in Moscow.
Russia, US and Saudi Arabia are the world’s three biggest oil producers by far, meeting around a third of the world’s almost 100 million barrels per day (bpd) of daily crude consumption.
Russian Energy Minister, Novak, said yesterday that Russia and a group of producers around the Middle East which dominate the Organisation of the Petroleum Exporting Countries (OPEC) might sign a new long-term cooperation deal at the beginning of December, the TASS news agency reported.
Novak did not provide details.
A group of OPEC and non-OPEC producers have been voluntarily withholding supplies since January 2017 to tighten markets, but with crude prices up by more than 40 per cent since then and markets significantly tighter, there has been pressure on producers to raise output.
US crude inventories were forecast to have fallen for a fourth consecutive week last week, according to analysts polled ahead of reports from industry group the American Petroleum Institute (API) yesterday and the US Department of Energy on Wednesday.
Also supporting prices was an attack on the headquarters of Libya’s National Oil Corporation (NOC) in the capital Tripoli on Monday.
The NOC has continued to function relatively normally amid chaos in Libya.
Oil production has been hit by attacks on oil facilities and blockades, though last year it partially recovered to around one million barrels per day.
As Middle East markets tighten, Asian buyers are seeking alternative supplies, with South Korean and Japanese imports of US crude hitting a record in September.
US oil producers are seeking new buyers for crude they used to sell to China before orders slowed because of the trade disputes between Washington and Beijing.
