Oil reaches its highest level in four years, OPEC and Russia resist rising production to offset sanctions imposed by Iran

SINGAPORE (Reuters) – Brent crude oil prices hit a new high in four years on Tuesday, due to the imminence of US sanctions against Iran and apparent reluctance from the US. OPEC and Russia to offset the expected losses.

Brent LCoC1 crude futures reached $ 81.69 a barrel shortly after 06:00 GMT, a new level since November 2014. They were still at $ 81.50 at 0655 GMT, up 30 cents, or 0.4 % compared to their last closing.

United States West Texas Intermediate (WTI) CLc1 futures were at $ 72.28 per barrel, up 20 cents or 0.3 per cent from their latest settlement.

The United States, starting November 4, will target Iranian oil exports with sanctions, and Washington is pressuring governments and businesses around the world to line up and reduce their purchases in Tehran.

"Iran will lose considerable export volumes, and given the reluctance of OPEC + to increase its production, the market is ill-equipped to fill the gap," said Harry Tchilinguirian, Global Head of Commodity Markets at BNP Paribas. Tuesday.

OPEC + brings together members of the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC Russian suppliers, who have agreed to reduce their production from 2017.

While Britain, China, France, Germany, Russia and Iran have been determined to develop payment mechanisms to continue trading despite US sanctions, most analysts have Are waiting for Washington to act between bpd) of off-market crude oil supplies.

(For a graph on "Brent to November 2014 High", click on tmsnrt.rs/2xATyY1)

Will OPEC BE ACT?

US President Donald Trump has called on OPEC and Russia to increase supplies to offset the expected drop in Iranian exports. Iran is the third largest producer of OPEC.

However, OPEC and Russia have so far rejected these calls.

"Any formal decision on oil production by the producer group, unless an extraordinary meeting, will be held only at the December meeting. Thus, the window period for oil prices to potentially increase earnings is wide enough, Iran loses its exports and OPEC + remains on hold, "said Tchilinguirian.

Ashley Kelty, an oil analyst with financial services firm Cantor Fitzgerald, said the crude could soon reach $ 90 a barrel.

"We do not believe that OPEC can significantly increase production in the short term because the physical reserve capacity of the system is not very high," said Kelty.

"If OPEC is physically unable to accelerate production, oil prices still have a long way to go," said Stephen Innes, head of trading for Asia-Pacific at OANDA in Singapore.

Bank of America Merrill Lynch has raised its average Brent forecast for 2019 from $ 75 per barrel to $ 80 and increased its WTI forecast from $ 2 to $ 71 per barrel.

He said that "the Iranian factor could dominate the market in the short term and cause a spike (in gross price)," even though he added that "emerging market demand concerns could reappear later" .

Indian refiners, hit by high crude prices and a sluggish rupee, are planning to cut back on oil imports, which could indicate that high prices are starting to weigh on demand.

Despite the bullish sentiment, commodity trader Vitol said current prices already reflected tightening of the market and more oil would arrive in 2019.

Vitol also said that non-OPEC producers, particularly the United States, could put on the market up to 2 million barrels a day of new crude in 2019.

To reflect the rise in US oil exports, CME Group Inc (CME.O) announced Monday that he would be launching a futures contract on WTI Houston crude in the fourth quarter.

CME's announcement follows rival Intercontinental Exchange (ICE.N) said in July that he would offer a crude futures contract for Houston.