'Crucial period' for oil as Iran exports shrink: IEA

Oil prices rose on Tuesday as United States sanctions squeezed Iranian crude exports, tightening global supply despite efforts by Washington to get other producers to increase output.

U.S. West Texas Intermediate (WTI) crude CLc1 futures rose $1.12 to settle at $70.37 a barrel, a one-week high. In New York last night the price was $78.43, up 1 per cent so far this month.

Brent crude futures were last down 23 cents on the day at $78.83 a barrel by 3pm, having touched a session peak of $79.66, the highest since late May, when the price broke above $80.

The EIA's most recent weekly ethanol production data shows production reached 1.087 million barrels per day the week ending August 31, up from 1.07 million barrels per day the previous week.

"A drawdown in crude oil inventories isn't very comforting when you're going to lose a lot of Iranian crude in a couple of weeks", said Phil Flynn, an analyst at Price Futures Group.

Buyers have asked to lift more Saudi oil than contracted volumes in October amid fears that the sanctions, to be imposed on Iran's crude exports from November 4, will crimp supply during peak winter demand in Asia, the sources said.

Iranian production has already fallen to the lowest since July 2016, at 3.63 million barrels a day, as buyers retreat ahead of US sanctions that come into force on November 4.

US nationwide crude inventories probably fell 1.75 million barrels last week, according to a Bloomberg survey of analysts.

Oil prices rose on Tuesday as the U.S. Energy Information Administration (EIA) lifted oil-price forecasts and lowered U.S. crude output expectations. "The situation should be closely watched, the right decisions should be taken", he said.

In Venezuela too, production dipped in August to 1.24 million barrels a day, and should it continue to decline, may hit 1 million barrels a day at the end of 2018. Rising output in Libya, Iraq, Nigeria and Saudi Arabia is offsetting declines in Iran, which faces new US sanctions on exports, and in Venezuela.

"As we move into 2019, a possible risk to our forecast lies in some key emerging economies, partly due to currency depreciations versus the USA dollar, raising the cost of imported energy", the agency said.

It reported Iranian crude production fell 200,000 b/d from July to 3.52 million b/d in August as the re-imposition approached.

Novak said global oil markets were "fragile" due to geopolitical risk and supply disruptions.

OPEC said the world will need 32.05 million bpd from its 15 members in 2019, unchanged from last month.