Oil prices rose on Monday as U.S. drilling stalled and investors anticipated lower supply once new U.S. sanctions against Iran's crude exports kick in from November.
Brent crude oil jumped $1.09 a barrel, or 1.4 percent, to a high of $77.92, but then eased to $77.60 by 1330 GMT. U.S. light crude was 55 cents higher at $68.30.
"A higher oil price scenario is built on lower exports from Iran due to U.S. sanctions, capped U.S. shale output growth, instability in production in countries like Libya and Venezuela and no material negative impact from a U.S./China trade war on oil demand in the next 6-9 months," said Harry Tchilinguirian, oil strategist at French bank BNP Paribas.
"We see Brent trading above $80 under (that) scenario," he told Reuters Global Oil Forum.
U.S. drillers cut two oil rigs last week, bringing the total count to 860, Baker Hughes said on Friday.
The number of rigs drilling for oil in the United States has stalled since May, reflecting increases in well productivity but also bottlenecks and infrastructure constraints.
Outside the United States, Iranian crude oil exports are declining ahead of a November deadline for the implementation of new U.S. sanctions.
Although many importers of Iranian oil have said they oppose sanctions, few seem prepared to defy Washington. "Governments can talk tough," said Energy consultancy FGE. "They can say they are going to stand up to Trump and/or push for waivers. But generally the companies we speak to ... say they won't risk it," FGE said. "U.S. financial penalties and the loss of shipping insurance scare everyone."
While Washington exerts pressure on countries to cut imports from Iran, it is also urging other producers to raise output in order to hold down prices.
U.S. Energy Secretary Rick Perry will meet counterparts from Saudi Arabia and Russia on Monday and Thursday respectively as the Trump administration encourages the world's biggest exporter and producer to keep output up.
Investors are concerned about the impact on oil demand of the trade dispute between the United States and other large economies, as well as the weakness of emerging markets.
"Trade wars, and especially rising interest rates, can spell trouble for the emerging markets that drive (oil) demand growth," FGE said.
Despite this, the consultancy said the likelihood of much weaker oil prices was fairly low as the Organization of the Petroleum Exporting Countries would probably adjust output to stabilise prices.
Reporting by Christopher Johnson in LONDON and Henning Gloystein in SINGAPORE