Crude oil futures were largely stable in mid-morning trade in Asia Tuesday as supply-side indicators and geopolitical tensions kept a lid on volatility while inventors awaited fresh fundamental cues from weekly U.S. inventory data.
Markets remained supported by the introduction on Tuesday of new US sanctions against Iran, which initially target Iran's purchases of USA dollars - in which oil is traded - as well as metals trading, coal, industrial software and its auto sector.
USA investment bank Jefferies said in a note "the Saudi and Russian production surges appear to be more limited" than expected, adding the imminent reinstatement of US sanctions against Iran also fed bullish sentiment.
A day later, on Tuesday, European Union (EU) put in place a statute that would prevent European companies from pulling out of Iran without its authorisation.
Discussion around possible waivers from the United States for some importing countries were still floating around the market, resulting in uncertainty about the impact the Iranian sanctions will likely have, analysts said.
"Many countries, including Europeans, disagree with the US sanctions and are willing to work with Iran", said the official, who asked not to be named.
Jameel Ahmad, global head of currency strategy and market research at FXTM, said the escalation "is just reminding investors that their trade war concerns are going nowhere anytime soon". The US will also target business conducted by foreign financial institutions with the Central Bank of Iran.
U.S. West Texas Intermediate (WTI) crude CLc1 futures fell $1.85 to $67.32 a barrel, a 2.7 percent loss.
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"The market continues to price in geopolitical risk from the reimposition of sanctions by the USA on Iran", said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut. While the sanctions may take away almost 1 million bpd from the market, the shortfall is expected to be filled by increased output from Saudi Arabia, Russia, and the United States.
Oil prices rose on Monday after Saudi crude production registered a surprising dip in July and as American shale drilling appeared to plateau.
EIA also reported on Wednesday that USA oil production declined to 10.9 million barrels per day during the week ending July 27, dropping from its record high level of 11 million barrels per day.
USA crude stockpiles were expected to have dropped 3.3 million barrels last week.
The first and second cargoes will be received at the ports of Vadinar and Mundra, while the third cargo will go to Paradip, he said.
Crude has hovered within a $3 range so far this month, with a measure of oil-market volatility falling to the lowest level since May.
In America, customs will begin collecting duties on 279 product lines of Chinese goods as of 23 August, the US Trade Representative's Office said Tuesday.
Analysts have cautioned that a global heatwave could affect oil demand. China has proposed to impose retaliatory tariffs on $60 billion worth of USA goods, including Liquefied Natural Gas (LNG), fueling speculation that it could also impose tariffs on oil.
This is unedited, unformatted feed from the Press Trust of India wire.