LONDON (Reuters) – Oil traded below a four-year high on Wednesday as top exporter Saudi Arabia said it increased output to near a record high and after Reuters reported that Russia and Saudi Arabia had struck a private deal in September to pump more.
FILE PHOTO: Pump jacks operate in front of a drilling rig in an oil field in Midland, Texas U.S. August 22, 2018. REUTERS/Nick Oxford/File Photo
Crude still found support from expectations that U.S. sanctions on Iran will further cut the OPEC country’s oil exports, tightening supplies and straining the ability of other major producers.
Brent crude LCOc1, the global benchmark, fell 12 cents to $84.68 a barrel at 1125 GMT, reversing an earlier gain. The price hit $85.45 on Monday, its highest since November 2014. U.S. crude CLc1 was down 5 cents at $75.18.
Saudi Energy Minister Khalid al-Falih said on Wednesday the kingdom had raised output to 10.7 million barrels per day in October. That would be just short of the record high for Saudi output of 10.72 million bpd in November 2016.
“We see the market is being well supplied,” Falih said in Moscow.
Nonetheless, analysts say there may not be enough spare production capacity in the short term as Iranian exports fall.
“Iran is the main supportive factor and is a test to the spare capacity of Saudi Arabia,” said Petromatrix analyst Olivier Jakob.
Oil prices have been climbing as buyers have already started steering clear of Iran before the implementation of U.S. sanctions starting Nov. 4.
The fall in Iranian exports is reducing the impact of a June agreement between the Organization of the Petroleum Exporting Countries and its allies, such as Russia, to hike output.
Sources told Reuters earlier on Wednesday that Russia and Saudi Arabia had informed the United States of their private deal to raise supply before a meeting in Algeria with other producers.
OPEC and its allies have been limiting supply since 2017 to get rid of a glut. They partially relaxed the cut in June, under pressure from U.S. President Donald Trump to cool prices.
So far, OPEC has ruled out any further production increase, beyond fully delivering the boost agreed in June. Iraq reiterated that stance on Wednesday.
A strong dollar .DXY, which makes oil imports more expensive for countries using other currencies and an industry report showing rising U.S. inventories also weighed on prices.
U.S. crude inventories rose by 907,000 barrels, the American Petroleum Institute said on Tuesday, ahead of Wednesday’s official supply report due at 1430 GMT. [EIA/S]
Additional reporting by Henning Gloystein; Editing by Edmund Blair and Louise Heavens