Oil prices rallied by more than 2 per cent on Monday, to levels not seen since November 2018, in the wake of reports that America is set to place new restrictions on Iranian oil.
Brent crude futures rose to $US73.77 ($103.30) per barrel on Monday, up 2.5 per cent from their last close as U.S. West Texas Intermediate (WTI) crude futures rose a similar amount.
The jump was triggered by a Washington Post article stating that the United States was preparing to announce that all buyers of Iranian oil would have to end their imports shortly, or be subject to trade sanctions.
A person familiar with the situation told Reuters the report was accurate, although a State Department spokesman declined to comment.
The US reimposed sanctions in November on exports of Iranian oil after President Donald Trump unilaterally pulled out of a 2015 nuclear accord between Iran and six world powers.
Washington, however, granted Iran's eight main buyers of oil, mostly in Asia, waivers to the sanctions which allowed them limited purchases for half-a-year. An end to the exemptions would hit Asian buyers most.
Iran's biggest oil customers are China and India, who have both been lobbying for extensions to sanction waivers.
South Korea is a major buyer of Iranian condensate, an ultra-light form of crude oil on which its refining and petrochemical industry relies heavily. The report comes amid an oil market that is already relatively tight.
Secretary of State Mike Pompeo will announce "that, as of May 2, the State Department will no longer grant sanctions waivers to any country that is currently importing Iranian crude or condensate", the Post's columnist Josh Rogin said, citing two State Department officials that he did not name.
Predictably oil prices are rising.
"The US chief Iran hawks indeed have the President's ear as (Secretary of State) Pompeo and (National Security Advisor) Bolton are singularly focused on bringing Iran's economy to its knees," said Stephen Innes, head of trading at SPI Asset Management. "Predictably oil prices are rising."
Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore, said the end to sanction waivers "could leave regional (Asian) heavyweights scrambling to find alternative supplies in the near term in what is already a very tight structural supply situation globally."
These potential disruption to Iranian supplies add to an already tight market.
The Organization of the Petroleum Exporting Countries (OPEC) has led supply cuts since the start of the year aimed at tightening global oil markets and to propping up crude prices.
In the United States, energy firms last week reduced the number of oil rigs operating by two, to 825, General Electric Co's Baker Hughes energy services firm said last week.
As a result, Brent prices have risen by more than a third this year, while WTI has climbed more than 40 per cent over the same period.
"Prices are rallying as expectations are growing that global supply will be immediately curtailed with the U.S. said to be scrapping its Iran oil waivers," said Kim Kwangrae, a commodities analyst at Samsung Futures Inc. in Seoul. "That's coming on top of the dialing back of U.S. explorers."
