The oil price rose on Thursday and was set for its largest weekly increase in a month, as the market prepared for potential disruption to crude flows from major exporter Iran in the face of U.S. sanctions.
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The United States plans to impose new sanctions against Iran, which produces around 4 percent of global oil supplies, after abandoning an agreement reached in late 2015 that curbed Tehran's nuclear activities in exchange for removing U.S.-Europe sanctions.
Brent crude futures were up 29 cents at $77.50 a barrel by 0933 GMT, having gained 3.5 percent so far this week, the largest weekly increase since mid-April.
U.S. West Texas Intermediate crude futures were up 42 cents at $71.56 a barrel.
The oil price is at its highest since late 2014 and is on track for its fourth consecutive quarterly gain, the longest such stretch for over 10 years.
Analysts had little hope that opposition to the U.S. action would prevent sanctions from going ahead.
"Europe and China will not fight against the U.S. sanctions. They will grumble and accept it. There is no one who will realistically choose Iran over the U.S.," said energy consultancy FGE.
"We believe the previous 1 million bpd limit for exports (imposed during previous sanctions) will be reimposed. As before, it may take several rounds of reductions to reach target levels," FGE's founder and chairman Fereidun Fesharaki wrote in a note.
Even without disruption to Iran's crude flows, the balance between supply and demand in the oil market has been tightening steadily, especially in Asia, and as top exporter Saudi Arabia and No.1 producer Russia have led efforts since 2017 to withhold oil supplies to prop up prices.
Saudi Arabia is monitoring the impact of the U.S. withdrawal from the Iran nuclear deal on oil supplies and is ready to offset any shortage but it will not act alone to fill the gap, an OPEC source familiar with the kingdom's oil thinking said on Wednesday.
"What the full impact on Iranian flows will be is still difficult to estimate," Petromatrix strategist Olivier Jakob said.
"One thing that has changed and which I think is clearly a new development is that it seems to me that the White House administration has really pushed Saudi Arabia to do something about price and to put supply back into the market to make sure prices do not run up ... before (when sanctions were last in place) Saudi Arabia was driving its own oil policy."
One factor that could partially mitigate any shortfall from Iran is soaring U.S. oil output.
The EIA on Tuesday raised its forecast for U.S. output in its monthly report to 12 million bpd late next year. The agency has raised its forecasts every month since last August. [EIA/M]
This would make the United States the world's largest producer, ahead of both Russia and Saudi Arabia.
(Additional reporting by Henning Gloystein in SINGAPORE; Editing by Jane Merriman)