Sources say Gibraltar will release Iranian oil tanker seized in July for violating sanctions on Syria.

Gibraltar will on Thursday release an Iranian oil tanker seized by Royal Marines in the Mediterranean in July, Reuters reported, citing the British Sun newspaper.

Sources close to Gibraltar Chief Minister Fabian Picardo said he would not apply to renew an order to detain Grace 1. The sources added that Picardo is now satisfied that the oil tanker is no longer heading to Syria.

"There is no reason to keep Grace 1 in Gibraltar a moment longer if we no longer believe it is in breach of sanctions against the Syrian regime," the newspaper quoted a source close to Picardo as saying.

The UK and Gibraltar seized the Iran-flagged tanker Grace 1 in early July on the grounds that it was attempting to transport oil to Syria, a violation of EU sanctions.

Iran later seized the British-flagged Stena Impero in the Persian Gulf. However, Iranian Foreign Minister Mohammad Javad Zarif denied the move was an act of revenge for the capture of the Iranian tanker, claiming Iran had taken measures against the ship to implement international law.

The report that the Grace 1 will be released on Thursday comes a day after Gibraltar denied that the Iranian tanker is poised to be released.