Oil falls as US prepares to unveil new Iran sanctions

By Florence Tan and Trixie Yap

SINGAPORE, Aug 24 (Reuters) - Oil prices slipped more than $1 a barrel on Monday as investors took profits ahead of an expected announcement from Washington about imposing more sanctions on Iran that may further disrupt supplies from the Middle East.

Brent crude futures fell $1.49, or 1.6%, to $92.90 by 0649 GMT, while U.S. West Texas Intermediate crude was at $85.32 a barrel, down $1.74, or 2%.

Both contracts posted their second consecutive weekly gains last week, up more than 5%, as peace talks between the U.S. and Iran hit a stalemate, capping oil shipments through the Strait of Hormuz, where a fifth of the world's supply used to transit.

U.S. Treasury Secretary Scott Bessent, who is set to hold a press conference at 2 p.m. EDT (1800 GMT) on Monday, has threatened to impose "the toughest sanctions in history" on Iran. President Donald Trump has also threatened to impose sanctions on Iran's trading partners.

"Oil slipped after a two-week rally as traders awaited the US plan to economically isolate Iran due later Monday," said Saxo Bank analysts in a note.

Iran has condemned U.S. plans to announce new sanctions even as President Masoud Pezeshkian called for a diplomatic solution.

"The more pragmatic members of the Iranian leadership would prefer to de-escalate but the hardliners would probably prefer to fight to the bitter end," IG markets analyst Tony Sycamore said.

"I think by the end of this week we will have a good idea which side of the Iranian leadership has the upper hand."

Offers of Iranian crude to Chinese buyers have declined and prices have jumped as the U.S. blockade has cut Tehran's shipments, according to trade sources.

However, Iran has granted permission for a number of Iraqi oil tankers to pass through the Strait of Hormuz following repeated requests from Baghdad, Iran’s state news agency IRNA reported on Saturday.

Some analysts expect the recovery in supplies from the Middle East to take even longer than anticipated as the U.S.-Iran conflict persists.

"Crude (supply) is tightening. Recent weeks have seen one of the sharpest declines in oil-on-water, whilst onshore inventories are declining as well, including in China," said Morgan Stanley analysts in a note.

"A reduction in supply is driving this, most notably from the Middle East where several data sources put aggregate exports back at March/April levels," they said, slowing their assumption for a recovery in Middle East supplies. 

Meanwhile, fewer than 20 commodity vessels transited the Strait of Hormuz at the weekend, shipping data showed on Monday, as Iranian and U.S. blockades restrict traffic through the chokepoint for energy shipments.

(Reporting by Florence Tan; Editing by Clarence Fernandez and Lincoln Feast)