A worker pours extracted crude oil into a buried drum for heating during a distillation process (Photographer: Dimas Ardian/Bloomberg)

Oil Posts Monthly Gain as Iranian Sanctions Stoke Supply Fears

(Bloomberg) -- Crude rose this month as sanctions on Iranian oil stoked concern that supplies will contract, overshadowing speculation that a U.S.-China trade war will weaken demand.

Futures in London settled 4.3 percent higher in August, the biggest monthly gain since April and U.S. crude also rose for the month. Yet, both benchmarks faltered on Friday as Saudi Arabia was said to raise its crude output in August from July levels.

“You are seeing month over month gains, but I am seeing this as a range-bound market,” said Rob Haworth, who helps oversee $151 billion at U.S. Bank Wealth Management in Seattle. “Saudi Arabia and Russia are increasing production, U.S. production could increase, that ultimately limits the upside here.”

Oil Posts Monthly Gain as Iranian Sanctions Stoke Supply Fears

President Donald Trump reimposed sanctions on Iran, pulling the U.S. out of the nuclear accord with the Islamic republic in May, despite opposition from allies, China and Russia.

Brent, the global benchmark, is more vulnerable than West Texas Intermediate crude to any impact on Iranian supplies. Both benchmarks have gained this month as American stockpiles shrink and domestic production plateaus. WTI climbed above $70 a barrel in New York this week for the first time since late July.

WTI for October delivery slipped 45 cents to settle at $69.80 a barrel on the New York Mercantile Exchange. Total volume traded was about 43 percent below the 100-day average. Futures posted a 1.5 percent advance this month.

Brent futures for October delivery, which expire Friday, fell 35 cents to settle at $77.42 a barrel on the ICE Futures Europe exchange. Brent’s at a $7.62 premium to WTI. The more-active November Brent contract slid 38 cents.

“There is increasing concern about the impact of the sanctions on Iran,” said John Kilduff, a partner at New York-based hedge fund Again Capital LLC. “There is a sense that things are going to get quite tight.”

Oil-market news:

  • Gasoline futures closed little changed at $2.1437 a gallon.
  • The oil drilling expansion resumed in U.S. shale fields as explorers clamor for the most expensive land gear.
  • Money managers increased their bullish ICE Brent crude oil bets by 64,635 net-long positions to 389,066, the most bullish in seven weeks, according to weekly ICE Futures Europe data on futures and options.
  • Saudi Arabia pumped 10.424 million barrels of crude a day in August and supplied 10.467 million a day to the market, according to OPEC delegates who declined to be identified.

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