By Henning Gloystein
SINGAPORE (Reuters) - Oil prices rose on Tuesday with re-introduced U.S. sanctions against major crude exporter Iran expected to tighten global supply. Spot Brent crude oil futures were $74.17 per barrel at 0710 GMT, up 42 cents, or 0.6 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures were up 30 cents, or 0.4 percent, at $69.31 barrel.
U.S. sanctions against Iran, which shipped out almost 3 million barrels per day (bpd) of crude in July, officially came into effect at 12:01 a.m. U.S. Eastern time (0401 GMT) on Tuesday.
"The re-imposition of U.S. sanctions on Iran remains the key (price) driver in the near-term. Supply losses could range from 600,000 to 1.5 million bpd," ANZ said on Tuesday in a note to clients.
As a result, the bank said, "the oil market should remain tight, despite OPEC increasing oil production to offset losses
elsewhere".
Many countries, including U.S. allies in Europe as well as China and India, oppose the 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," a senior U.S. administration official said on Monday.
French bank Societe Generale (PA:SOGN) said there was currently a "comfortable supply" in physical crude markets, but noted "Iran sanctions will take another 1 million bpd off the markets".
This would leave markets with little spare capacity to deal with unforeseen disruptions, the bank said.
HEAT IMPACTS OIL
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.-China trade dispute, and unplanned supply disruptions. Some analysts warned that a global heat wave could also 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 such as thermal coal and natural gas.
But U.S. bank JPMorgan (NYSE:JPM) said a warmer-than-usual fourth quarter could stem from a potential El Niño weather pattern that "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.