Oil hits four-year high as OPEC, allies maintain supply cut

Iran's Oil Minister Bijan Zanganeh

Iranian leaders have already threatened to disrupt oil shipments through the Strait of Hormuz, the world's busiest sea route for crude oil exports. Earlier, oil prices had surged on worries about global supply after USA sanctions on Iran's oil exports take effect November 4. "We will remember. The OPEC monopoly must get prices down now!"

As new United States sanctions against Iran come into force on November 4, importers would find it harder to buy oil from Tehran.

“It's going to be significantly less than it was, and probably lower than most people expected when the sanctions were announced - hence the higher prices, ” Luckock said at the APPEC event.

Commodities trackers Trafigura and Mercuria predicted prices could rise towards $100 per barrel by the end of the year or in early 2019.

Brent crude hit its highest since November 2014 at $80.94 per barrel, up $2.14 or 2.7 per cent, before easing to $80.62 by 11:05am EDT (15:05 GMT).

The price rise is notably caused by a recent drop in Iran's supply because of US sanctions. In order to meet global crude demand growth, nearly $11 trillion of investment will be needed across the industry to 2040, the producer group said.

Iran's OPEC representative Hossein Kazempour Ardebili on Sunday said his country was continuing to meet its OPEC quota share.

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However, Saudi Arabia's influential oil minister Khalid al-Falih left the way open to a future production hike, as supplies tighten due to the USA imposing sanctions on Iranian oil from November this year. "We in Saudi Arabia have not seen demand for any additional barrel that we did not produce". The kingdom does expect to pump more in September and increase again in October, he said, without pledging specific volumes.

Now, however, Iran's OPEC governor, Hossein Kazempour Ardebili, said, "If there is a fall not only from Iran, but anybody else, it is the responsibility of OPEC and non-OPEC to balance the market".

"Oil demand will be declining in the fourth quarter of this year and the first quarter of next year". A spike to $90 per barrel is likely in the coming months, J.P. Morgan said in its latest market outlook.

Wall Street bankers and hedge funds also saw some caveats to the bullish mood. She says the question of how much Trump's administration can control the Iranian oil market is only one part of the equation.

Worldwide outright crude prices have also maintained a bullish tone in recent weeks with front-month ICE Brent futures consistently testing the $80/b this month amid growing concern over the loss of Iranian barrels and the lack of spare capacity amongst its OPEC partners outside Saudi Arabia. Even if the oil cartel and Russian Federation marginally increase production, that may not make up for the cuts in Iranian crude flowing into the global market, analysts feel.

Brent futures were trading at $80.48 a barrel at noon Monday, up $2.24.

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