Oil prices rise after US renews sanctions against Iran

Oil prices rose as the United States reintroduced sanctions against major crude exporter Iran, tightening global markets.

Spot Brent crude oil futures were at $74.08 per barrel at 0624 GMT on Tuesday, up 33 cents, or 0.4 percent, from their last close.

US West Texas Intermediate (WTI) crude futures were up 20 cents, or 0.3 percent, at $69.21 barrel.

US sanctions against Iran, which shipped out almost three million barrels per day (bpd) of crude in July, officially came into effect at 0401 GMT (12:01am US Eastern time) on Tuesday.

"The US seems hell-bent on regime change in Iran," said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

Many countries, including US allies in Europe as well as China and India oppose the sanctions, but the US government said it wants as many countries as possible to stop buying Iranian oil.

"It is our policy to get as many countries to zero as quickly as possible. We are going to work with individual countries on a case-by-case basis, but our goal is to reduce the amount of revenue and hard currency going into Iran," said a senior US administration official on Monday.

French bank Societe Generale said there was currently a "comfortable supply" in physical crude markets, but noted "Iran sanctions will take another one million bpd off the markets."

This would leave markets with little spare capacity to deal with unforeseen disruptions, it said.

Heat-wave impact

The main oil-market price drivers of recent months have been output levels by top producers Russia, Saudi Arabia and the United States, renewed Iran sanctions, the US-China trade dispute, and unplanned supply disruptions. Some analysts warned that a global heat wave could also now affect oil demand.

Much of the northern hemisphere has been gripped by extreme heat this summer, pushing up demand for industrial and residential cooling.

This mostly impacts demand for power fuels such as thermal coal and natural gas.

But US bank JPMorgan said a warmer-than-usual fourth quarter could stem from a potential El Nino weather pattern that "can cause droughts, flooding and other natural disasters across the globe, including heatwaves in the US that affect commodities."

"Past instances of El Nino have resulted in sharp drops in US residential and commercial heating oil demand and prices," it said.