Oil rises as United States sanctions on Iran stir supply worries

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Oil prices held steady on Wednesday, supported by a report of rising USA crude inventories as well as the introduction of sanctions against Iran.

Oil prices fell from more than $100 a barrel in 2014 to less than $30 a barrel in early 2016 amid a supply glut, but have recovered to trade above $70 a barrel since April, as output curbs by the Opec cartel of producers and other countries helped to reduce supplies.

Not just China but Russian Federation too is determined to continue oil and gas trade with Iran.

The reimposed sanctions initially target Iran's United States dollar purchases, metals trading, coal, industrial software and its auto sector.

Also last week, USA energy companies cut oil rigs for a second time in the past three weeks as the rate of growth has slowed over the past couple of months. These sanctions did not include Iran's oil exports.

Both futures contracts have risen during the previous two sessions.

Oil was trading at $74 per barrel of Brent benchmark, while the US West Texas Intermediate stood at $69.77 on Monday.

Analysts estimated that Iranian production would drop further amid the restored sanctions and drive the oil price further up.

U.S. President Donald Trump's twitter messages have blamed rising oil prices on OPEC rather than Saudi Arabia, OPEC's de facto leader, specifically.

On Friday, the Houston-based Baker Hughes reported that the number of active drilling rigs in the United States decreased by four to 1,048. The negative trend in oil prices also harmed by the rise of the dollar exchange rate, which leads to the weakening of other commodities priced in the USA currency, such as crude oil.

Iraqi Prime Minister Haider al-Abadi said his country opposes sanctions on Iran, but will abide by them to protect its own interests.

"Without the extra Saudi oil we had in June, it's hard to crunch the numbers and get a lower price going into the end of the year", said John Kilduff of Again Capital.

US crude oil production in 2018 was expected to grow at a slower rate than previously forecast amid lower crude prices according to a monthly USA government report on Tuesday.

Also weighing on prices on Wednesday was data from the U.S. Energy Information Administration that market participants described as bearish.

Shale output helped to US production over 10 million bpd this year for the first time since the 1970s.

The market was also bolstered by a report on Tuesday from the American Petroleum Institute (API), which said crude inventories fell by 6-million barrels in the week to August 3 to 407.2-million. Following the announcement by EIA, the WTI lost 2.78 percent to 67.25 US dollars, while Brent decreased 2.55 percent to 72.75 dollars. Weekly data from the American Petroleum Institute for US inventories is due later on Tuesday at 4:30 p.m. EDT, followed by the EIA's report on Wednesday morning.