Oil rises amid uncertainty over aftermath from Iran sanctions

Oil prices edged up earlier on Friday, as traders were trying to measure the future impact on market supply after US sanctions against Iran’s hydrocarbon exports take effect.

At 7:38 am GMT, Brent crude went up 0.17% to $81.86 per barrel (pb) from its last close, as US Nymex crude rose 0.22% to $72.28 pb.

The international benchmark front-month November contract would expire later on Friday at $81.78 pb, as it rose to four-year peak of $82.55 pb on Tuesday.

Brent is on course to rise 5.6% in September, the largest rise since last April, while Nymex is heading to add 3.5%, the largest gain since last June.

Washington’s sanctions against Iran, a major oil producer, would start to bite as from 4 November, as the US was pushing importers of Iranian crude to cut their purchases from the oil-rich nation to zero. The White House aims to pressure Tehran to negotiate a new nuclear deal and curtail its influence in the Middle East.

“The market has been focusing on trading headlines on the Iran sanctions for a whole week […] but views on how much OPEC [the Organization of the Petroleum Exporting Countries] and Russia can make up for the losses vary,” Shengda Futures commodity research head Chen Kai told Thomson Reuters.

Saudi Arabia, the de-facto OPEC leader, and other non-OPEC producers discussed the possibility of an output hike of around 500,000 barrels per day (bpd), two sources familiar with the producer group’s policy.

As the Gulf country is set to quietly pump extra supplies to the market to compensate the shortfall from Iran during the coming couple of months, its concerns mounted over the need to trim production next year to balance supply and demand as the US adds more crude.

It is worth noting that Baker Hughes is expected to release its data pertaining oil rig count later in the day.

However, key producers were not likely to compensate the shortage caused by the sanctions, Australia and New Zealand Banking Group (ANZ) stated in a note, estimating the loss at 1.5 million bpd.