Oil inched higher Tuesday, with prices tapping fresh 3½-year highs as investors fretted over future crude output from Iran and Venezuela on the prospect of new U.S. sanctions on those countries.
June West Texas Intermediate crude CLM8, +0.61% on the New York Mercantile Exchange rose 20 cents, or 0.3%, to $72.44 a barrel after touching a high of $72.72. The contract, which expires at the day’s settlement, closed at $72.24 a barrel on Monday to mark the highest finish for a front-month contract since Nov. 26, 2014. July WTI crude CLN8, +0.41% which will become the front month, added 17 cents, or 0.2%, to $72.52.
Global benchmark July Brent crude LCON8, +1.22% saw much stronger gains, up 80 cents, or 1%, to $80.02 a barrel on ICE Futures Europe, aiming for the highest first front-month contract settlement since late November 2014.
Secretary of State Mike Pompeo on Monday made sweeping demands that Iran must meet before the U.S. enters a new nuclear pact with the country. Washington threatened “the strongest sanctions in history” if the Islamic Republic didn’t yield to the requirements.
Oil today is up “specifically because of Pompeo’s speech,” said Thomas Pugh, commodities economist at Capital Economics.
“It certainly looks like the U.S. is going to go as hard as possible on sanctions and try their best to make it hurt,” Pugh said.
The White House has laid out new demands for Iran. It said any new nuclear deal with the U.S. would require Iran to stop enriching uranium and to pull its support for militant groups in the Middle East.
Iran immediately rejected those demands. “The world of today doesn’t accept that the U.S. decides for the world,” said Iranian President Hassan Rouhani, according to The Wall Street Journal. “Who are you to decide for Iran and the world?”
Analysts have estimated that anywhere from 400,000 barrels to 1 million barrels a day of Iran’s 2.4 million barrels a day of crude exports could be at risk.
Oil prices rallied Monday over concerns that the U.S. will impose new sanctions on Venezuela, specifically on its oil industry, after President Nicolás Maduro won a second six-year term on Sunday. The election of Maduro, who has presided over the country’s economic collapse, was boycotted by the opposition and condemned as a sham by the U.S. and other countries.
On Monday, U.S. President Donald Trump issued an executive order “prohibiting certain additional transactions” with respect to Venezuela. In part, it bans the U.S. purchase of any debt owed to the government of Venezuela.
Sanctions on Venezuela’s oil industry could intensify worries about a drop in global supply, adding to those around the Trump administration’s withdrawal from the Iran nuclear deal and reimposition of sanctions on Tehran.
Meanwhile, strength in U.S. production remained a key concerns.
The Energy Information Administration will issue its weekly update on U.S. petroleum supplies Wednesday morning, with the American Petroleum Institute’s own data due out late Tuesday.
On average, analysts polled by S&P Global Platts forecast a fall of 1.7 million barrels in crude stockpiles, along with supply declines of 620,000 barrels for gasoline and 1 million barrels for distillate, which include heating oil.
June natural gas NGM18, +2.38% rose 2.4% to $2.877 per million British thermal units, poised for the highest finish since late January.
The current weather outlook is “lending support” to natural gas, as the market “seeks out new near-term highs,” said Robbie Fraser, commodity analyst at Schneider Electric. The above average cooling demand would likely pump power generation demand for the eastern half of the US this week and into next.
— Christopher Alessi and William Watts contributed to this article