Oil prices climb as Iran imposes its sanctions; United States seek to prevent supply shortfall

SINGAPORE (Reuters) – Oil prices rose on Tuesday because of US sanctions against the Iranian oil industry, despite Washington's efforts to have other major suppliers compensate for the expected turmoil.

The United States West Texas Intermediate (WTI) CLc1 futures were at $ 67.70 per barrel at 0637 GMT, up 65 cents or 0.2% from their latest settlement.

Brent LCoC1 futures futures rose 38 cents, or 0.5%, to $ 77.75 a barrel.

"The markets … are expecting substantial price pressure as Iran sanctions," said Stephen Innes, head of trading for Asia-Pacific at the contract broker at OANDA term in Singapore.

Washington is pressuring other countries for them to also reduce imports from Iran, with close allies like South Korea and Japan, but also India, showing signs of withdrawal.

US Secretary of Energy Rick Perry met in Washington Monday with Saudi Energy Minister Khalid al-Falih, while the Trump administration urges major producing countries to maintain production ahead of news sanctions. Perry will meet Russian Energy Minister Alexander Novak in Moscow on Thursday.

Russia, the United States and Saudi Arabia are by far the three largest oil producers in the world, with about one-third of the roughly 100 million barrels a day of daily crude oil consumption.

The combined production of these three producers has increased by 3.8 million bpd since September 2014, more than the peak of 3 million bpd that Iran has recorded over the past three years.

Russian Minister of Energy Alexander Novak said on Tuesday that Russia and a group of producers from the Organization of Petroleum Exporting Countries (OPEC) dominated by the Middle East could sign a new agreement to long-term cooperation, reported the TASS news agency. Novak did not provide details.

A group of producers around OPEC and Russia have voluntarily suspended supplies since January 2017 to tighten markets, but crude prices have risen by more than 40% and the markets are much tighter.

Brutal discount

With the tightening of crude markets in the Middle East due to US sanctions against Iran, many Asian refiners are looking for alternative sources, with South Korean and Japanese imports of US crude reaching a record high in September.

At the same time, US oil producers are looking for new buyers of crude that they were selling to China before orders dried up due to trade disputes between Washington and Beijing.

Traders have said that this has largely paved the way for the reduction of US crude WTI compared to Brent, which was close to $ 10 a barrel, the largest since June, the LCO-CLFVMc1.

US crude oil exports to Asia: tmsnrt.rs/2CITKcJ

Iranian crude exports to Asia: tmsnrt.rs/2NDV3Os

Discount US Brent crude: tmsnrt.rs/2CEdfTu