Oil prices rise ahead of U.S. sanctions on Iran

[October 31, 2018]   By Christopher Johnson

LONDON (Reuters) - Oil prices rose on Wednesday, recovering some ground after two days of losses, as markets braced for the imposition of U.S. sanctions on Iran next week and stock markets clawed back some of their recent losses.

Benchmark Brent crude oil <LCOc1> was up 35 cents at $76.26 a barrel by 1115 GMT. The contract fell 1.8 percent on Tuesday, at one point touching its lowest since Aug. 24 at $75.09.

U.S. light crude <CLc1> was 25 cents higher at $66.43. It hit a two-month low of $65.33 a barrel on Tuesday.

New U.S. sanctions on Iran begin on Nov. 4 and Washington has made it clear to Tehran's customers that it expects them to stop buying any Iranian crude oil from that date.

Imports of Iranian crude by major buyers in Asia hit a 32-month low in September, as China, South Korea and Japan sharply cut their purchases ahead of the sanctions, government and ship-tracking data showed.

Oil market sentiment also received some support from equity markets, which pulled back from 20-month lows on Wednesday after pledges by China to support its markets.

"The bullish argument for crude still centers on Iran sanctions which are due to begin in November, and continued output declines from Venezuela," said William O'Loughlin, investment analyst at Rivkin Securities.

Despite the rally on Wednesday, both crude benchmarks are around $10 below four-year highs reached on Oct. 3 and on track for their worst monthly performance since July 2016.

Oil has been caught in the global financial market slump this month, with equities under pressure from the trade war between the world's two largest economies, the United States and China.

An oil well pump jack is seen at an oil field supply yard near Denver, Colorado, U.S., February 2, 2015. REUTERS/Rick Wilking/File Photo

The United States has already imposed tariffs on $250 billion worth of Chinese goods, and China has responded with retaliatory duties on $110 billion worth of U.S. goods.

Global oil supply is rising with the top three producers, Russia, Saudi Arabia and the United States, pumping 33 million barrels per day (bpd) in September, Refinitiv data show, an increase of 10 million bpd since the start of the decade.

Inventories are rising and the American Petroleum Institute reported U.S. crude stocks rose 5.7 million barrels last week, above analysts' forecasts. Official U.S. data on inventories will be published at 10:30 a.m. EDT (1430 GMT).

Hedge funds are still overwhelmingly long oil and may have to liquidate positions if prices keep falling, accelerating a market sell-off, analysts say.

"Signs of price angst are pervasive and given the herding mentality of market players, the worse may not yet be over," said Stephen Brennock, analyst at London brokerage PVM Oil.

(Reporting by Christopher Johnson in LONDON, Aaron Sheldrick in TOKYO and Henning Gloystein in SINGAPORE; Editing by Alexander Smith)

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