Oil prices surged 2 percent on Friday and were on track to end a run of weekly declines on signs that Iran sanctions may limit global supply and that a trade war may not curb China’s appetite for U.S. crude.
Brent crude oil LCOc1 rose $1.29 a barrel to $76.02 by 10:27 a.m. EDT [1427 GMT] after earlier touching a high of $76.42. U.S. crude CLc1 was $1.20 higher at $69.03.
U.S. crude was set to be up more than 4.7 percent on the week, after seven consecutive declines and Brent was on track for a 5.8 percent rise after three weeks of falling prices.
“Both crude markers are on track to end a steady run of weekly declines. This is largely due to a tightening fundamental outlook on the back of looming Iranian supply shortages,” said Stephen Brennock, analyst at London brokerage PVM Oil Associates.
Concerns that an escalating trade dispute between China the U.S. could slow economic growth and weigh on crude purchases eased slightly after sources told Reuters that China’s Unipec will resume purchases of U.S. crude oil in October, after a two-month halt due to the dispute.
At the same time, concerns about global crude supply intensified with signs that U.S. sanctions on Iran are curbing shipments.
The U.S. government reimposed sanctions on Iran this month after withdrawing from a 2015 international nuclear deal, which Washington saw as inadequate for curbing Tehran’s activities in the Middle East and denying it the means to make an atomic bomb. Tehran says it has no ambitions to make such a weapon.
Iran is the third-biggest producer in the Organization of the Petroleum Exporting Countries, supplying around 2.5 million barrels per day (bpd) of crude and condensate to markets this year, equivalent to about 2.5 percent of global consumption.
“Third-party reports indicate that Iranian tanker loadings are already down by around 700,000 bpd in the first half of August relative to July, which if it holds will exceed most expectations,” U.S. investment bank Jefferies said on Friday.
“We expect that by Q4 the market will be dealing with either undersupply, dwindling spare capacity – or both,” it added.
Energy consultancy FGE says it expects Iran’s crude and condensate exports to drop below 1 million bpd by mid-2019.
The dollar index served as a tailwind, said Bob Yawger, director of futures at Mizuho in New York. A key index of the dollar versus a basket of other currencies.—Reuters