Oil prices jumped more than 2 percent on Monday to a near six-month high, on growing concern about tight global supplies after the United States announced a further clampdown on Iranian oil exports.
Washington said it will eliminate in May all waivers allowing eight economies to buy Iranian oil without facing U.S. sanctions.
"The geopolitical risk premium is back in the oil market, in a big way," said John Kilduff, a partner at Again Capital LLC in New York. "Most, if not all, legitimate commercial interests will avoid Iran oil purchases. Iran's flow will be reduced to a trickle."
Brent crude futures rose $2.07, or 2.88 percent, to settle at $74.04 a barrel. The session high of $74.52 a barrel for the international benchmark was the highest since Nov. 1.
U.S. West Texas Intermediate crude futures climbed $1.70, or 2.66 percent, to settle at $65.70 a barrel. The contract hit $65.92 a barrel, the highest since Oct. 31.
In November the United States reimposed sanctions on exports of Iranian oil but granted waivers to Iran's eight main buyers: China, India, Japan, South Korea, Taiwan, Turkey, Italy and Greece. They were allowed to keep making limited purchases for six months.
U.S. Secretary of State Mike Pompeo reiterated that Washington's goal was to bring down exports of Iranian oil to zero and said there were no plans for a grace period beyond May 1.
U.S. officials are seeking ways to prevent Iran from circumventing oil sanctions, a senior administration official said.
Iran said the decision not to renew the waivers has "no value" but Tehran was in touch with European partners and neighbors and would "act accordingly," Iranian news agencies reported, citing the Foreign Ministry.
Another drop in Iranian exports would further squeeze supply in a tight market. The United States has also sanctioned OPEC member Venezuela, and the Organization of the Petroleum Exporting Countries and allied producers including Russia have voluntarily cut output, which has helped raise oil prices more than 35 percent this year.
Iran's biggest oil customers are China and India. India hopes Washington will allow allies to keep buying some Iranian oil instead of halting the purchases altogether from May, a source familiar with U.S.-India talks said.
Trump said Saudi Arabia and other OPEC nations could "more than make up" for any drop in Iranian oil supplies.
Saudi Arabia said it would coordinate with other producers to ensure an adequate crude supply and a balanced market.
"By and large, we expect the Saudis to up output in likely capping Brent price advances to around the $75-76 area followed by some leveling through much of the spring period," Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
(Additional reporting by Alex Lawler and Henning Gloystein; Editing by David Gregorio and Susan Thomas)