- Oil prices rose more than 1.5% on Monday.
- US economic sanctions against Iran are set to take effect on Tuesday.
- Other sanctions, including those targeting Iranian crude, will resume in November.
- Watch oil trade in real time here.
Oil prices rallied Monday as markets braced for the reimposition of US sanctions against Iran.
An initial round of sanctions against Tehran was reimposed Monday, administration officials said, as has been expected since President Donald Trump withdrew the US from the Iran nuclear deal in May. The 2015 pact among world powers eases sanctions on Iran in exchange for restraints on its nuclear weapons program.
Those sanctions affect a number of sectors including metals, automobiles, and carpets. They also block the purchase of Iran’s sovereign debt and block the country’s access to US dollars.
Iran’s oil industry is expected to be hit in the next round of economic penalties against the country, slated to take effect Nov. 4. All countries must stop importing Iranian oil by that date, the State Department said in June, or face sanctions. Analysts say the sanctions could put more than two million barrels per day at risk.
It’s unclear if the administration will allow sanction waivers, a tactic used in the Obama era to wean the world off of Iranian oil and avoid supply shocks.
“Our goal is to get the import of Iranian oil to zero,” an administration official told reporters Monday, according to S&P Global. “We are not looking to grant exemptions or waivers but are glad to discuss requests and look at requests on a case-by-case basis.”
On top of that, Iranian President Hassan Rouhani has threatened to disrupt major regional oil production and exports if the Trump administration follows through with oil sanctions.
Meanwhile, an unexpected drop in Saudi production last month also bolstered prices. Output in Saudi Arabia fell by 200,000 from a month earlier in July to 10.29 million barrels per day, two OPEC sources told Reuters on Friday. The unofficial OPEC leader had told Washington it could increase oil supply by a “measurable” amount in anticipation of Iran sanctions.
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