Yemen rebels fire two missiles at Saudi capital: coalition

Saudi Arabia says it intercepts missile above Riyadh says report

Analysts' estimates of the possible reduction in Iranian crude supplies as a result of any new USA sanctions range from as little as 200,000 bpd to as much as 1 million bpd, with most impact from 2019 as sanctions take time to impose.

Saudi Arabia accused Iran of "taking advantage of the revenue generated by the lifting of the sanctions to destabilize the region", the foreign ministry said.

OPEC's oil supply-cutting deal with non-OPEC producers such as Russian Federation has helped to clear a global oil supply glut and boost prices.

The result has been a sharp increase in prices, which has been broadly welcomed by OPEC members, especially Saudi Arabia, which needs the revenues to pay for its ambitious transformation programme.

"Iran's exports of oil to Asia and Europe will nearly certainly decline later this year and into 2019 as some nations seek alternatives in order to avoid trouble with Washington and as sanctions start to bite", said Sukrit Vijayakar, director of energy consultancy Trifecta.

But further significant price increases threaten to complicate OPEC's strategy by accelerating the upturn in shale drilling, as well as denting the growth in oil consumption. Yemen has been embroiled in civil war since 2014, with Saudi Arabia involved in a military campaign there for the last three years.

US crude CLc1 settled down $1.67 at $69.06 per barrel and Brent LCOc1 settled down $1.32 at $74.85.

That made Iran the third-biggest exporter of crude within the Organization of the Petroleum Exporting Countries, behind Saudi Arabia and Iraq.

It was the busiest day in US front-month contracts since August, and for Brent the busiest in nearly a month.

The result is that sanctions will start to phase in quickly and could start to progressively cut Iranian exports within the next few months, assuming the sanctions are effective.

The OPEC source said any decision in June to raise output "should be driven by a potential physical shortage or reduction in production from any oil supply source not only Iran". That world no longer exists.

But the USA sanctions on Iran, assuming they are effective, mark the end of the current output agreement.

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