Oil reaches its highest level in four years as sanctions against Iran loom

LONDON (Reuters) – Oil has traded at over $ 85 a barrel and near a four-year high on Wednesday, bolstered by expectations that US sanctions against Iran will restrain supply and compel Saudi Arabia and other producers to exploit more.

Raw exports from Iran, OPEC's third largest producer, are already down, with US sanctions taking effect on Nov. 4 dissuading buyers. The decline in exports reduces the impact of the increase in OPEC production agreed in June. [OPEC/O]

The Brent LCoC1, the world's benchmark, rose 38 cents to $ 85.18 a barrel at 8:33 GMT. It reached $ 85.45 on Monday, its highest level since November 2014. US crude CLc1 rose 24 cents to $ 75.47.

While Iranian exports are expected to fall further, analysts believe that unused production capacity may be insufficient in the short term to meet demand, which could require large storage removals.

"Iran is the main support factor and is testing the available capacity of Saudi Arabia," said Olivier Jakob, an analyst at Petromatrix.

"The fact that Saudi Arabia has been shy in its reaction has reinforced the idea that available spare capacity is limited."

The Organization of Petroleum Exporting Countries, as well as allies, including Russia, have been limiting supply since 2017 to get rid of the overabundance. They partially eased the cut in June, under pressure from US President Donald Trump to lower prices.

OPEC has so far ruled out any further increase in production beyond what was agreed in June, despite rising prices and Trump's increased pressure.

Russian Minister of Energy Alexander Novak said on Wednesday that the market has more or less stabilized, but many uncertainties remain, including sanctions imposed on Iran, and could raise the prices.

Nevertheless, a strong dollar .DXY, which makes oil imports more expensive for countries using other currencies, as well as an industry report showing an increase in inventories in the United States limited the recovery.

US stocks of crude increased by 907,000 barrels during the week, to reach 400.9 million, of September 28, announced Tuesday the US Institute of Petroleum, before the official report on supplies scheduled for Wednesday at 14:30 GMT.[EIA/S]

(GRAPH: Oil prices in different currencies – tmsnrt.rs/2N67zl9)