Mubasher: Oil prices went up on Tuesday, after the reinstatement of US sanctions against Iran, a key crude exporter, which are expected to cast the markets into shortage.

By 8:37 am GMT, US Nymex futures rose 0.36% to $69.26 per barrel (pb), as global benchmark Brent crude futures climbed 0.58% to $74.18 pb.

“The re-imposition of US sanctions on Iran remains the key driver in the near-term, [so] supply losses could range from 600,000 to 1.5 million bpd,” Australia and New Zealand Bank (ANZ) stated in a note to clients on Tuesday, adding that “the oil market should remain tight, despite OPEC [the Organization of Petroleum Exporting Countries] increasing oil production to offset losses elsewhere.”

US sanctions against Iran, which produced almost 3 million barrels per day (bpd) in July, took effect at 12:01 am EDT (4:01 am GMT) on Tuesday, while Washington demanded as many oil importers as possible to cease their crude purchases from Tehran, despite opposition by the US allies in Europe as well as China and India.
In addition to the US sanctions against Tehran, the key price drivers in the market in recent months were output levels from major producers Saudi Arabia, Russia and the US, the trade spat between Washington and Beijing, an abrupt series of supply disruptions.

In the same vein, some analysts warned that a global heat wave, known as El Niño, could also affect demand for power fuel such as thermal coal and natural gas.

However, the heat wave “can cause droughts, flooding and other natural disasters across the globe, including heatwaves in the US that affect commodities,” US lender JPMorgan told Thomson Reuters.

Past instances of El Niño led to a steep drop in heating oil demand and, consequently prices, the US bank added.