West Texas Intermediate crude for September delivery traded at $69.11 a barrel on the New York Mercantile Exchange, down six cents, at 7:55 a.m.in London.
After the sanctions were lifted in 2016, Indian state-owned refiners stepped up Iranian crude imports as Tehran offered steep discounts on freight. One reason for this is the uncertainty over the size of the supply losses which range from 600,000 to 1.5 million barrels per day. Bullish traders like the uncertainty because this makes the short-sellers nervous enough to pay anything to get out of bad short positions.
Any development in the U.S.
Jameel Ahmad, global head of currency strategy and market research at FXTM, said the escalation "is just reminding investors that their trade war concerns are going nowhere anytime soon". Administration officials have said they might look at requests on a case-by-case basis, while also maintaining that the goal is to cut Iranian oil imports to zero. "The reports that Saudi Arabia's production actually dropped in July continue to provide support for the market".
Many countries, including United States allies in Europe as well as China and India oppose the introduction of new sanctions, but the U.S. government said it wants as many countries as possible to stop buying Iranian oil.
Generally speaking, however, the increased production from the Saudis, Russian and US leave the markets with a little spare capacity to deal with unforeseen disruptions. Meanwhile, the production of Syncrude Canada's offline on its sands facility is impacting the market.
Additionally, there are also reports that many USA shale oil drillers posted disappointing quarterly results in recent weeks, hit by rising operating costs, hedging losses and a drop in crude prices away from 2018 highs reached between May and July.
China's crude imports recovered slightly in July after falling for the previous two months, but were still among the lowest this year due to a drop-off in demand from the country's smaller independent, or "teapot", refineries. And took place despite a pledge by the Saudis and top producer Russian Federation in June to raise output from July, with Saudi Arabia promising a "measurable" supply boost.
Friday's report from Baker Hughes that said US energy companies cut two oil rigs last week contributed as well to oil's rise.
USA sanctions on Iran's oil customers snap back November 4 and could remove up to 1 million b/d of oil from the global market.
It is still almost three months until US sanctions on Iran's oil exports snap back into force, but they are already having a big impact on the Persian Gulf country's trade.