Sun, 05 Jul 2020

Brent crude reached $75 a barrel for the first time since October as the US decision to remove Iran sanctions waivers combined with a drop in Russian flows to fuel supply fears.

Futures in London rose as much as 1.4%, gaining for a fifth session. Saudi Arabia on Wednesday responded to the US move to tighten sanctions on Iran, saying it saw no immediate need for action in the oil market. Separately, Russian crude deliveries to parts of Europe have been halted amid complaints of contamination.

Brent is set for a fifth straight week of gains, even as a jump in US stockpiles slowed the rally spurred by the removal of sanctions waivers. The exemptions expire May 2, but Saudi Arabia has said it won't significantly raise output next month and will stay within its OPEC production limit until the group's current supply deal expires in June.

"If Iran goes down to zero that's 1 million barrels a day off the market and Saudi Arabia is in no rush to replace those barrels,'' said Tamas Varga, an analyst at PVM Oil Associates Ltd. "From next week the market is going to get even tighter than it is now.''

Brent for June settlement rose 1.3 percent to $75.52 a barrel on the ICE Futures Europe exchange as of 11:11 in London, and was at a premium of $9.30 to West Texas Intermediate. The global benchmark crude closed little changed at $74.57 on Wednesday. Brent June options contracts expire Thursday.

WTI for June delivery advanced 37 cents to $66.26 a barrel on the New York Mercantile Exchange, after declining 41 cents on Wednesday.

Russian oil flows to parts of Europe have been halted, limiting supplies from one of the continent's biggest sources of crude. Poland, which receives oil through a northern section of the giant Druzhba pipeline, stopped importing from Russia, saying shipments had become contaminated by organic chlorides.

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