Crude oil hits highest since November 2014

Major buyers have signalled that they will cut purchases of Iranian oil ■

London, Oct. 1: Brent crude oil neared its highest since November 2014 on Monday, driven by concern about a supply crunch once US sanctions against Iran come into force next month.

December Brent futures were last up 45 cents at $ 83.18 a barrel by 1343 GMT, having touching their highest in almost four years at $ 83.32. US light crude futures were up 17 cents at $ 73.42.

“Iran has attempted to downplay the impact of looming US sanctions by claiming that it has no intention of reducing oil production. However, such optimistic claims are falling on deaf ears,” PVM Oil Associates strategist Stephen Brennock said.

Investors have indicated that they see prices rising, loading up on options that give the holder the right to buy Brent at $ 90 by the end of October. Open interest in call options at $ 90 has risen by nearly 12,000 lots in the past week to 38,000 lots, or 38 million barrels.

Higher oil prices and dollar strength, which has battered the currencies of several big crude importers, could hit demand growth next year, analysts said. But for now the focus is US sanctions on Iran’s energy industry, which come into force on November 4 and are designed to cut crude exports from the third- biggest producer in the Opec.

Several major buyers in India and China have signaled that they will cut purchases of Iranian oil. China’s Sinopec said it had halved loadings of Iranian oil in September.

“If Chinese refiners do comply with US sanctions more fully than expected, then the market balance is likely to tighten even more aggressively,” Emirates NBD analyst Edward Bell wrote in a note.

Hedge funds have increased bets on a further price rise. Exchange data shows the combined net long position in Brent and US light crude futures and options at its largest since late July, equivalent to about 850 million barrels.

Donald Trump spoke to Saudi King Salman on Saturday on ways to maintain sufficient supply. “Even if they ( Saudi Arabia) wanted to bend to President Trump’s wishes, how much spare capacity does the kingdom have?” said Stephen Innes, head of trading for Asia- Pacific at futures brokerage Oanda in Singapore.

If Chinese refiners do comply with US sanctions more fully than expected, then the market balance is likely to tighten even more aggressively. — EDWARD BELL, Analyst, Emirates NBD