Oil slips below $85 as Saudi output inches towards record

Moscow, Riyadh told US about lifting output but US sanctions on Iran lent some support to crude

Oil traded below a fouryear high yesterday 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.

Crude still found support from expectations that US sanctions on Iran will further cut the Opec country’s oil exports, tightening supplies and straining the ability of other major producers.

Brent crude, the global benchmark, fell 12 cents to $84.68 (Dh311) a barrel at 1125 GMT, reversing an earlier gain. The price hit $85.45 on Monday, its highest since November 2014. US crude was down 5 cents at $75.18.

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 US sanctions starting November 4.

The fall in Iranian exports is reducing the impact of a June agreement between the Organisation of Petroleum Exporting Countries and its allies, such as Russia, to hike output.