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Oil drops but remains near its month-high on US sanctions

The oil prices in Asia eased on Wednesday, but remained near a month-high on the backs of new U.S. Sanctions against a number of shipping companies and ships. Traders also looked forward to the OPEC+ summit over the weekend.

Brent crude dropped 19 cents or 0.3% to $68.95 per barrel at 0433 GMT. U.S. West Texas Intermediate Crude fell 16 cents or 0.2% to $65.43 per barrel.

The benchmarks rose more than 1% during the previous session, after the U.S. imposed sanctions against a network led by an Iraqi/Kittitian businessman who was smuggling Iranian crude oil under the guise of Iraqi oil.

Priyanka S. Sachdeva is a senior market analyst with Phillip Nova. She said that the new sanctions are likely to tighten up the supply of oil in the future.

Sachdeva said that "structural volatility persists with Iran sanctions and geopolitical hotspots forming the risk premium, and keeping crude near its recent strength."

Market participants were also awaiting the outcome of the meeting of eight countries of the Organization of the Petroleum Exporting Countries (OPEC) and their allies, which took place on September 7. Analysts believe that the group will not make any further changes in production until later.

Geopolitical risk continues to influence oil prices. "The market is watching the upcoming OPEC meetings and is on high alert for any further increases that could lead to an oversupply," Emril Jamil said, senior analyst at LSEG.

A preliminary poll on Tuesday showed that the U.S. crude stockpiles, as well as distillate and gasoline stocks, were also expected to have decreased last week.

Three analysts surveyed by before weekly inventory data were released estimated that crude inventories had fallen by an average of 3.4 million barrels during the week ending August 29.

Prices were held in check by soft economic data. U.S. Manufacturing contracted for the sixth consecutive month, as President Donald Trump’s tariffs impacted business confidence and economic activities. This weighed on demand for oil.

(source: Reuters)