LONDON—Oil prices edged up Wednesday morning, maintaining near four-year highs, as the market girded itself for the reimposition of U.S. economic sanctions on Iran’s oil industry.
Brent crude, the global benchmark, was up 0.1% to $84.93 a barrel on London’s Intercontinental Exchange . On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.03% at $75.25 a barrel.
Brent has risen by roughly 17% since the start of August, largely on the back of a faster-than-expected decline in Iranian crude exports in the run to up to the enactment of U.S. oil sanctions on Nov. 4.
“Sanctions are in full effect in terms of the physical market,” said Bjarne Schieldrop, chief commodities analyst at SEB Markets. Traders are already buying physical oil for November delivery and beyond and they are “not doing it with Iran,” Mr. Schieldrop said.
The Iran Aluminium Co. plant in Arak. Photo: Ali Mohammadi/Bloomberg News
Officials at the state-run National Iranian Oil Co. have said they provisionally expect crude shipments to have dropped to about 1.5 million barrels a day in September, compared with 2.3 million barrels a day in June, according to people familiar with the matter.
President Donald Trump pulled the U.S. out of a 2015 international agreement to curb Iran’s nuclear program in May, setting the stage for the reimposition of sanctions.
Prices have also been bolstered by a late September decision by the Organization of the Petroleum Exporting Countries and its partner producers not to raise production at a faster rate than previously planned. That helped send Brent squarely above the symbolic $80-a-barrel threshold last week, and it has since quickly climbed to hover around $85 a barrel.
OPEC and its production allies said they would adhere to current production quotas first implemented at the start of 2017. That means continuing a gradual ramp up in production that was agreed at the start of the summer in an effort to bring down over compliance with the initial agreement.
At the same time, there is growing market concern that OPEC and Russia have limited spare oil capacity to fully fill the Iranian shortfall, even if they wanted to, according to Stephen Brennock, analyst at brokerage PVM Oil Associates Ltd.
Still, some market observers think that in the long-run OPEC and non-OPEC supply—including from the U.S.—will offset declines in Iranian production and exports.
“This is particularly the case, as there are now clear signs that demand is slowing, which underpins our forecast that prices will fall to $60 a barrel by end-2019,” said Caroline Bain, chief commodities economist at Capital Economics.
Oil market observers Wednesday were looking ahead to weekly U.S. petroleum inventory data from the Energy Information Administration. U.S. crude stockpiles are expected to have risen by 1.3 million barrels, on average, last week, according to a survey of analysts and traders conducted by The Wall Street Journal.
Among refined products Thursday, Nymex reformulated gasoline blendstock—the benchmark gasoline contract—was down 0.03% at $2.13 a gallon. ICE gasoil, a benchmark for diesel fuel, changed hands at $740.50 a metric ton, on par with the previous settlement.
Write to Christopher Alessi at [email protected]