SINGAPORE: Brent crude oil prices hit a fresh four-year high on Tuesday amid looming U.S. sanctions against Iran and an apparent reluctance by OPEC and Russia to raise output to offset the expected to hit to supply.
Brent crude futures LCOc1 rose to $81.69 a barrel shortly after 0600 GMT, a level not seen since November 2014. They were still at $81.50 at 6:55 GMT, up 30 cents, or 0.4 percent from their last close.
US West Texas Intermediate (WTI) crude futures CLc1 were at $72.28 a barrel, up 20 cents, or 0.3 percent from their last settlement.
The United States from November 4 will target Iran’s oil exports with sanctions, and Washington is putting pressure on governments and companies around the world to fall in line and cut purchases from Tehran.
OPEC+ groups members of the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC supplier Russia, who together agreed to curtail output starting in 2017.
While Britain, China, France, Germany, Russia and Iran on Monday said they were determined to develop payment mechanisms to continue trading despite the sanctions by the United States, most analysts expect Washington’s actions to knock between 1 million and 1.5 million barrels per day (bpd) of crude oil supplies out of markets.
US President Donald Trump has demanded that OPEC and Russia increase their supplies to make up for the expected fall in Iranian exports. Iran is the third-largest producer in OPEC.
OPEC and Russia, however, have so far rebuffed such calls.
“Any formal decision on oil output by the producer group, barring an extraordinary meeting, will only take place at the December meeting. Thus the window period for oil prices to potentially extend gains is quite wide as Iran loses exports and OPEC+ remains on standby,” Tchilinguirian said.
Ashley Kelty, oil analyst at financial services firm Cantor Fitzgerald said crude could soon hit $90 per barrel.
“We don’t believe OPEC can actually raise output significantly in the near term, as the physical spare capacity in the system is not that high,” Kelty said.
“If OPEC is physically unable to ramp up production, then oil prices do indeed have much further to run,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA in Singapore.