Oil prices rise as Saudi cuts crude output

NEW YORK (Reuters) – Oil futures gained on Monday after the Organization of the Petroleum Exporting Countries (OPEC) sources said Saudi crude production unexpectedly fell in July, raising concerns about global oil supplies as the United States prepares to reinstate sanctions against major exporter Iran.

Brent crude futures rose 54 cents to settle at $73.75 a barrel, while US West Texas Intermediate (WTI) crude futures rose 52 cents to settle at $69.01 a barrel.

Saudi Arabia pumped around 10.29 million barrels per day (bpd) of crude in July, two sources at the OPEC said on Friday, down about 200,000 bpd from June.

That came despite a pledge by the Saudis and top producer Russia in June to raise output from July, with Saudi Arabia promising a “measurable” supply boost.

“Prices had dropped recently assuming that Saudi was going to continue to produce,” said Stewart Glickman, an energy equity analyst at CFRA Research in New York. “If the argument now is that maybe they can’t produce as much as everyone was hoping for, that puts some upward pressure on prices.”

Brent prices fell 6.5 percent in July, their steepest monthly drop since July 2016.

US investment bank Jefferies said in a note that “the Saudi and Russian production surges appear to be more limited” than expected, adding that the imminent reinstatement of US sanctions against Iran also fed bullish sentiment.

Washington is due to reinstate some sanctions against Iran that it suspended after a 2015 deal between world powers and Tehran that sought to curb Iran’s nuclear program.

Some of the sanctions resume on Tuesday. The United States also plans to re-introduce sanctions on Iranian oil in November, which could dent the OPEC member’s output.

Renewed sanctions are part of the Trump administration’s strategy to deny resources to the Iranian leadership.