Oil futures climbed early Tuesday in New York, driving U.S. prices above $70 a barrel, amid a looming tropical storm off the Gulf Coast and concerns about risks to Iranian supply from U.S. economic sanctions.
Most markets in the U.S. were closed Monday in observance of the Labor Day holiday.
October West Texas Intermediate crude on the New York Mercantile Exchange CLV8, +2.08%the U.S. oil benchmark, rose $1.18, or 1.7%, at $70.97 a barrel. The October contract finished the month of August with a rise of about 3.2%, according to FactSet data.
November Brent LCOX8, +1.75% now the front-month contract, gained $1.01, or 1.3%, at $79.15. The global benchmark’s October contract expired at Friday’s settlement. The contract saw a monthly climb of about 4.3%.
Tropical storm Gordon is set to become a hurricane as it makes landfall along the U.S. Gulf of Mexico coastline later Tuesday, prompting oil producers “to take precautionary measures and shut production at offshore oil platforms,” according to Tamas Varga, an analyst at brokerage PVM Oil Associates.
Meanwhile, he added, in Libya “a week of violence between rival militias in the capital of Tripoli is also making oil bears cautious.”
But Varga noted that the “main bullish catalyst” driving oil prices up in recent weeks has been Iran, with Brent advancing more than 4% last month.
Iranian exports are already falling at a faster rate than expected, with officials at the state-run National Iranian Oil Co. provisionally expecting crude shipments to drop to around 1.5 million barrels a day in September, down from around 2.3 million barrels a day in June, according to people familiar with the matter.
President Trump’s decision in May to pull the U.S. out of a 2015 international agreement to curb Iran’s nuclear program set the stage for the reimposition of economic sanctions on the Islamic Republic, with measures directly targeting the country’s oil industry set to take effect in November.
At the same time, rising production from the Organization of the Petroleum Exporting Countries and its allies including Russia has been helping to keep a “cap on prices,” said Christyan Malek, an oil analyst at JPMorgan.
OPEC, de facto led by Saudi Arabia, and Russia agreed in late June to begin ramping up crude production after more than a year of holding back output.
Malek said oil market participants were looking ahead to an Algeria OPEC meeting at the end of the month for clearer signs on how prepared the Saudis and Russians are to put more barrels on the market and fill the gap left by declining Iranian exports.
Investors and analysts were also looking ahead to monthly reports from OPEC and the International Energy Agency next week, with an eye to Saudi and Russian production levels in August.
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