Oil prices extend gains after U.S. sanctions against Iran

Oil rallies as Iran sanctions kick in

Benchmark Brent crude oil futures on Tuesday were 1.5 percent higher at $74.80 a barrel.

"The price action does not do the contract any favor as it shows how speculative day-traders remain firmly in control and with that we can see temporary dislocations to the global market", said Ole Sloth Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

The total exported quantities of Oman crude oil during July 2018 has reached 24.08 million barrels, with a daily average of 776,800 barrels. The Turkish lira fell to a new record low against the dollar amid a dispute with the USA government, while the Russian ruble also dropped after US sanctions on the country over its alleged involvement in poisonings in Britain.

Watch oil trade in real time here.

For the production expectations, the EIA on Tuesday slightly lowered its 2018 expectation for average 2018 USA crude output to 10.69 million barrels per day.

Oil prices held losses near a seven-week low as China vowed to retaliate against the USA administration's latest tariffs, raising trade tensions between the world's two biggest economies.

Indian refiners' interest in US crude will be welcome news to shale producers looking for buyers outside of China, which is likely to scale back imports as the trade dispute between the administration of President Donald Trump and Beijing escalates.

Oil has declined about 7 percent from the highs of June as trade tensions between the United States and China imperil economic growth and energy demand.

The market was moderated by lingering trade tensions between the United States and China, the world's leading economies.

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To recap this week's events, on Tuesday, the USA renewed sanctions against Iran that are expected to eventually remove about 1 million barrels per day of crude oil from the market.

U.S. sanctions on Iran's energy sector are set to be re-imposed after a 180-day "wind-down period" ending on November 4.

Meanwhile, investors are closely watching whether Saudi Arabia and other producers will increase output to replace potential supply losses from Iran as President Donald Trump is set to impose sanctions on the country's oil exports from November.

However, many European countries, China and India, oppose the sanctions, but the USA government said it wants as many countries as possible to stop buying Iranian oil. Iran's oil exports to India rose by more than 40,000 bpd from June to 706,452 bpd in July.

Later on Friday, Baker Hughes will publish its weekly report on the USA oil rig count.

"A full embargo seems unlikely and the oil market should remain well balanced in light of rising production and the emerging markets' fuel inflation pains", Norbert Rucker, head of macro and commodity research at bank Julius Baer, said.

In the USA, nationwide crude stockpiles dropped 1.35 million barrels last week, according to the EIA, while supplies stored in the key hub of Cushing, Oklahoma, slid for a twelfth straight week, declining by 590,000 barrels.

Iranian crude oil loadings to China and India increased significantly in July compared to the previous month despite US threats, a Platts survey showed. A weekly report by the Energy Information Administration, scheduled to be released at 10:30 a.m. ET, is expected to show a drawdown in USA inventories.

Prior to this deal, International Olympic Committee had struck deals for importing 10 million barrels from six cargoes in the spot market.

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