By Blessing James, Abuja
The oil benchmarks have risen strongly over the last two weeks with Brent gaining more than 10 percent on expectations that global supply will tighten later this year.
Supported by concerns that falling Iranian output will tighten markets once U.S. sanctions bite from November, oil prices rose on Monday.
Brent crude oil was up at 78.09 dollars a barrel. U.S. crude was 10 cents higher at 69.90 dollars as U.S. sanctions are already curbing exports from Iran.
“Exports from OPEC’s third-biggest producer are falling faster than expected and worse is to come ahead of a looming second wave of U.S. sanctions,” said Stephen Brennock, analyst at London brokerage PVM Oil Associates. “Fears of an impending supply crunch are gaining traction.”
OANDA, head of trading for Asia-Pacific at brokerage OANDA, said Brent was “supported by the notion that U.S. sanctions on Iranian crude oil exports will eventually lead to constricted markets”.
Edward Bell, analyst at Emirates NBD bank in Dubai, agreed:
“Iranian production is already showing signs of decline, falling by 150,000 bpd last month as importers of Iranian barrels are already moving away from taking shipments.”
Output was boosted by a recovery in Libyan production and Iraq’s southern exports hit a record high.
Meanwhile, trade disputes between the United States and other major economies including China and the European Union are expected to halt oil demand if they are not settled soon.
A private survey showed on Monday that China’s manufacturing activity grew at the slowest pace in more than a year in August, with export orders shrinking for a fifth month.
OANDA’s Innes said it was too early to say whether economic slowdown would put a serious dent in oil prices.
“It isn’t at all clear that such type of economic headwinds will topple oil prices,” Innes said.