Oil prices climb following unexpected production dip

Oil prices climbed Monday amid reports that Saudi Arabia’s crude production fell unexpectedly in July, while the reimposition of sanctions on Iran sparked concerns of a tighter oil market supply/demand balance in the future.

Last Friday, two OPEC sources said that Saudi Arabia produced about 10.3 million barrels per day of crude oil in July, down about 200,000 barrels per day from June, according to Reuters. OPEC and Russia agreed in June to start increasing crude oil production after prices rallied to a 3 1/2 year high on a tighter market fundamentals which followed more than a year of output curbs.

The U.S. will reimpose the first set of sanctions on Iran on Tuesday as part of its decision to pull out of the Iran nuclear deal. The remainder of the sanctions, including oil, will take effect in November, according to a statement from the White House.

The sanctions on oil could ultimately block more than 1 million barrels a day of Iran’s approximate 2.5 million barrels a day of crude oil exports.

Also, the latest drilling update indicated that production in the U.S. decreased in the prior week. Baker Hughes on Friday reported that the number of active oil rigs decreased by 2 versus the prior week.