Oil markets started cautiously on Tuesday, as many traders in Asia were reluctant to take on new positions ahead of the introduction of U.S. sanctions against major crude exporter Iran.
Spot Brent crude oil futures were at $73.74 per barrel at 0100 GMT on Tuesday, down 1 cent from their last close.
U.S. West Texas Intermediate (WTI) crude futures were down 8 cents at $68.93 barrel.
U.S. sanctions against major oil exporter Iran are set to kick in at 12:01 a.m. U.S. East coast time (0401 GMT) on Tuesday.
Traders in Asia said they were holding back on making bets on oil ahead of European and U.S. trading hours, which tend to see much higher liquidity and stronger price movements.
“The U.S. seems hell-bent on regime change in Iran and is reimposing sanctions at midnight Washington time as the 6th becomes the 7th of August,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.
Many other countries, including U.S. allies in Europe and also China and India oppose the introduction of new sanctions, but the U.S. 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 U.S. administration official on Monday.
ANZ bank said a 24-hour strike at three North Sea oil and gas platforms operated by Total, which started at 0500 GMT on Monday, was also supporting prices.
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 U.S. vs 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 like thermal coal and natural gas.
But U.S. bank JPMorgan said a warmer than usual fourth quarter, caused by a potential El Niño weather pattern, “can cause droughts, flooding and other natural disasters across the globe, including heatwaves in the U.S. that affect commodities.”
“Past instances of El Niño have resulted in sharp drops in U.S. residential and commercial heating oil demand and prices,” it said.
Source: Reuters
