Energy

Oil prices rise as Iran sanctions loom but trade row caps gains

Key Points
  • Investors remained cautious over the oil supply outlook, although the fallout from global trade tensions limited price gains.
  • The U.S. economy grew at its fastest pace in nearly four years in the second quarter.
  • Saudi Arabia last week said it was suspending oil shipments through the Red Sea's Bab al-Mandeb strait, after Yemen's Iran-aligned Houthis attacked two ships in the waterway.
An oil pumpjack operates near Williston, North Dakota.
Andrew Cullen | Reuters

Oil rose on Monday as investors remained cautious over the supply outlook, although the fallout from global trade tensions limited price gains.

October Brent crude futures were last up 90 cents, or 1.2 percent, at $75.19 a barrel by 9:55 a.m. ET (1355 GMT). The September contract expires on Tuesday. U.S. crude futures were up $1.65, or 2.4 percent, at $70.34 a barrel.

The oil price has been rallying almost uninterruptedly for the past two weeks, in part as looming sanctions on Iran have already started to curtail flows of oil from the country.

"There are a myriad of factors to follow at the moment in the oil market but one way or the other we always arrive at the same conclusion. It is the impact of the U.S. sanctions on Iran that will decide the next $15 a barrel," PVM Oil Associates Tamas Varga said in a note.

Oil prices are in a constructive period, says Helima Croft
VIDEO1:3601:36
Oil prices are in a constructive period, says Helima Croft

"The best case scenario is that the U.S. provides meaningful sanction waivers in the run-up to the mid-term elections and Iran can get away with a loss of around 500-700,000 barrels per day of exports. In case, however, President Trump plays hardball and puts its allies and foes under maximum pressure the loss of barrels could amount to 2 million barrels per day."

The U.S. economy grew at its fastest pace in nearly four years in the second quarter, but with Washington and Beijing at loggerheads over trade, oil prices could struggle this week, analysts said.

"Oil prices could struggle this week," said Stephen Innes, head of trading APAC at OANDA Brokerage.

"Concerns around the U.S.-China trade wars continue to weigh on prices, while the halt in Saudi shipments through the Red Sea waterway has seemingly failed to provide a bullish fillip," he said.

Saudi Arabia last week said it was suspending oil shipments through the Red Sea's Bab al-Mandeb strait, one of the world's most important tanker routes, after Yemen's Iran-aligned Houthis attacked two ships in the waterway.

U.S. energy companies added three oil rigs in the week to July 27, the first time in the past three weeks that drillers have increased activity, data released on Friday that showed.