Oil prices rose on Tuesday on crude shortage concerns as the Trump administration’s deadline for sanctions on Iranian crude nears.  

Oil prices up after sanctions on Iranian goods, not crude, went into effect

Oil prices rose on Tuesday as investors grew more concerned about crude supply shortages after the Trump administration slapped sanctions on a number of Iranian goods at 12:01 a.m.

The newly imposed US sanctions against Iran include US dollar purchases, metals trading, coal, industrial software and its auto sector.  Sanctions on Iranian crude are set to begin in November.

President Trump tweeted “These are the most biting sanctions ever imposed, and in November they ratchet up to yet another level.”

Brent crude futures ended the day 90 cents up, landing at $74.65/barrel after hitting a session high of $74.90.  US West Texas Intermediate rose by 16 cents to $69.17/barrel, down from its session high of $69.83.  The Canadian Crude Index was up 82 cents to $40.52.

“It certainly is a reminder to everyone that the U.S. is serious about sanctions, and it’s doubtful they will grant waivers,” John Kilduff, partner at Again Capital Management told Reuters.

Kilduff added that oil price gains were limited because market participants are unsure how much the US sanctions against Iranain crude will affect the Middle Eastern country’s output.

According to Kilduff, WTI gains did not match Brent because of an increase in US imports of Saudi crude.

“Anyone doing business with Iran will NOT be doing business with the United States,” tweeted Trump.  Despite Trump’s bluster, many European countries, China and India, say they are against the sanctions.

Iraq’s Prime Minister Haider al-Abadi says his country does not agree with the sanctions, but will abide by them in order to protect their own interests.

“The market continues to price in geopolitical risk from the reimposition of sanctions by the U.S. on Iran,” Gene McGillian, vice president of market research at Tradition Energy told Reuters.

“The reports that Saudi Arabia’s production actually dropped in July continue to provide support for the market.”

According to OPEC sources, Saudi Arabia’s production fell by about 200,000 barrels per day (b/d) last month, despite the kingdom’s pledge to boost its output.

As well, in its monthly report, the US Energy Information Administration forecasts US crude output to rise more slowly than anticipated due to slumping oil prices.

US crude production is set to rise 1.31 million b/d to 10.68 million b/d in 2018, down from last month’s forecast for growth amounting to 1.44 million b/d to 10.79 million b/d.

“We continue to expect Brent crude oil spot prices to fall toward $70 per barrel by the end of 2018, as the market appears to be fairly balanced in the coming months,” said Linda Capuano, EIA Administrator.

On Wednesday, the US Energy Information Administration will release its weekly US crude stock data.  Analysts polled prior to the data release expect inventories to have dropped by 3.3 million barrels last week.