US demands that importers stop buying Iranian oil saw prices surge following fears of a global shortage, but a potential trade war with China appears to have steadied the market.
Prices for Brent crude futures LCOc1 stands at 76.65 dollars with US West Texas Intermediate (WTI) crude futures CLc1 now at 70.72 dollars.
The rally in prices followed a new US demand that countries halt the import of Iranian oil by November or face sanctions.
The announcement has shocked many market analysts who view the sanctions as some of the strongest yet directed at Iran.
Others believe the demand is unrealistic and will not be enough to stop countries – such as China and India – from importing Iranian oil.
Saudi Arabia is also expected to increase production to make up for any supply shortages from rival Iran.
Other fears have impacted on the market, such as political instability in Libya and potential disruptions to Canadian exports.
Rival militias in Libya have clashed in the “oil crescent” region – causing exports to be halted from key ports – while there have been a new disagreement between the two rival administrations to the country’s oil.
A potential trade war between the US and China could impact on global demand and slow growth in the world’s two largest economies.