Oil rallies on weaker dollar and Iran supply uncertainty

© Reuters. FILE PHOTO: Pump jacks operate at sunset in Midland, Texas, U.S., February 11, 2019. Picture taken February 11, 2019. REUTERS/Nick Oxford/File Photo

By Jessica Resnick-Ault

NEW YORK (Reuters) - Oil prices soared on Monday, gaining on a pause in talks to end U.S. sanctions on Iranian crude, and as the dollar retreated from two-month highs.

Brent crude for August gained $1.24, or 1.7% to $74.74 a barrel by 1:50 p.m. EDT [1750 GMT]. U.S. West Texas Intermediate (WTI) crude for July rose $1.94, or 2.7% to $73.59.

Both benchmarks have risen for the past four weeks on optimism over the pace of global COVID-19 vaccinations and expected pick-up in summer travel. The rebound has pushed up spot premiums for crude in Asia and Europe to multi-month highs.

Bank of America (NYSE:BAC) said that Brent crude was likely to average $68 a barrel this year but could hit $100 next year on unleashed pent-up demand and more private car usage.

Oil was boosted by a weaker U.S. dollar, which can send speculative investors into greenback-denominated assets like commodities. [USD/]

Negotiations to revive the Iran nuclear deal took a pause on Sunday after hardline judge Ebrahim Raisi won the country's presidential election.

"The election of a hardliner in Iran is weighing on market (supply) as sanctions look less likely to be lifted," said Bob Yawger, director of Energy Futures at Mizuho in New York.

A deal could lead to Iran exporting an extra 1 million barrels per day, or 1% of global supply, for more than six months from its storage facilities.

Iranian and Western officials say Raisi's rise is unlikely to alter Iran's negotiating position. Two diplomats said they expected a break of about 10 days.

Additionally, oil prices have drawn support from forecasts of limited growth in U.S. oil output, giving the Organization of the Petroleum Exporting Countries more power to manage the market in the short term before a potentially strong rise in shale oil output in 2022.