Oil firm on Iran sanctions, but rising US supply and strong dollar drag

A partially constructed gas refinery at the South Pars gas field is seen on the northern coast of Persian Gulf in Asalouyeh, Iran. (AP pic)

SINGAPORE: Oil prices were firm on Wednesday on expectations of a tighter market once US sanctions start targeting Iran’s petroleum industry from next month, although a strong dollar and rising US crude supply curbed gains.

Brent crude oil futures were trading at US$84.89 (RM351.57) per barrel at 0222 GMT, up 9 cents from their last close.

US West Texas Intermediate (WTI) crude futures were up 5 cents at US$75.28 a barrel.

Traders said global oil markets remained tense because of the looming US sanctions against Iran’s oil exports, which kick in from Nov 4.

Brent and WTI earlier this week both reached levels last seen in November 2014, and the two contracts have risen by around 20 and 17% respectively since mid-August.

Despite this, traders said prices were held back by a strong dollar which makes oil imports more expensive for countries using other currencies domestically, as well as by climbing supply in the United States.

US commercial crude inventories rose by 907,000 barrels in the week to Sept 28 to 400.9 million, the private American Petroleum Institute (API) said on Tuesday. Refinery crude runs fell by 158,000 barrels per day (bpd), API data showed.

Official weekly government data is due from the Energy Information Administration (EIA) on Wednesday.

Traders said the rising stocks were partly due to a relentless increase in US crude oil production, which has jumped by a third since mid-2016 to a record 11.1 million bpd.

“We expect US crude production to exit the year at 11.3 million bpd,” Barclays bank said in a note on Tuesday.

That would mean the United States challenges Russia as the world’s biggest crude oil producer.