Prepare for $90 oil after sanctions against Iran take effect

Saudi Arabia Reduced Oil Production in July

Production was likely stable at a little below 11 million bpd last week, with imports up by 182,000 million barrels to 7.9 million bpd.

European officials have said their governments are considering opening accounts for Iran at their national banks, which could receive oil payments.

Brent futures rose 90 cents, or more than 1 percent, to $74.65 a barrel by 1:38 p.m. EDT (1738 GMT), after hitting a session high of $74.90.

Oil prices rose on Tuesday as the USA reintroduced sanctions against major crude exporter, Iran, tightening global markets.

The first round of renewed U.S. sanctions will take effect on Tuesday with the harshest sanctions, potentially targeting Iran's oil industry, expected to return in early November. Iranian oil exports are under a cloud because of renewed sanctions as part of the Trump administration's withdrawal from the worldwide agreement aimed at curbing Iran's nuclear programme.

U.S. President Donald Trump tweeted that the sanctions were "the most biting sanctions ever imposed".

Despite a general unwillingness among Iranian crude oil buyers to start cutting their imports, many have done jut that anxious about repercussions from the US if they don't.

"Anyone doing business with Iran will NOT be doing business with the United States", he added.

Iraqi Prime Minister Haider al-Abadi said his country opposes sanctions on Iran, but will abide by them to protect its own interests.

However, July imports were still the third-lowest so far this year.

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The last time Iran was sanctioned, it lost half of its exports, which have now returned to 2.4 million barrels per day.

Meanwhile, U.S. crude production, which has climbed dramatically fuelled largely by increased output from shale formations, may now rise more slowly as prices drop, according to the U.S. Energy Information Administration's monthly report.

In terms of production, the EIA on Tuesday slightly cut its 2018 expectation for average 2018 USA crude output to 10.69 million bpd, down from its previous estimate of 10.79 million bpd.

"Past instances of El Niño have resulted in sharp drops in USA residential and commercial heating oil demand and prices", it said.

While U.S. crude exports to China appear to have held up in August, with about 342,000 bpd expected to arrive, they seem set for a slump in September. Weekly data from the American Petroleum Institute for USA inventories is due later on Tuesday at 4:30 p.m. EDT, followed by the EIA's report on Wednesday morning.

China's prohibitive import tariff, which amounts to close to $18 a barrel when crude is at $70, should also deter other Chinese buyers such as state-owned companies Petro China, as well as state-controlled Zhenhua Oil and independent refiners, from importing US crude.

Analysts also warned that a global heatwave could affect oil demand.

Much of the northern hemisphere has been gripped by extreme heat this summer, pushing up demand for industrial and residential cooling.

Although not imposed as yet, China has proposed import taxes of up to 25 percent on US crude, as well as on liquefied natural gas and coal.

This story has not been edited by Firstpost staff and is generated by auto-feed.

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