The Opec logo is pictured ahead of an informal meeting between members in Algiers this month. File Picture: REUTERS/RAMZI BOUDINA
The Opec logo is pictured ahead of an informal meeting between members in Algiers this month. File Picture: REUTERS/RAMZI BOUDINA

London — Brent oil prices eased modestly on Wednesday but stayed near their highest level this year, supported by concerns that producers may fail to cover a supply shortfall once US sanctions againstIran come into force in November.

Brent, the global oil benchmark, slipped 18c to $78.85 a barrel by 1.36pm GMT, after Tuesday's 1.3% rise on a media report that Saudi Arabia, the world's largest oil exporter, was comfortable with prices above $80. ANZ bank said in a note that investors took the report, which cited unnamed sources, as a signal that Riyadh "won't be aggressively responding to the rise in prices with supply increases".

However, consultant JBC Energy cautioned against reading too much into the report, saying, "It may well be that too much attention is being put on these indirect anonymous statements." 

US crude prices were last up 28c at $70.13.

Reuters reported on September 5 that Saudi Arabia wanted oil to stay between $70 and $80 a barrel to keep a balance between maximising revenue and keeping a lid on prices until the US mid-term congressional elections.

The focus on oil supply has been reflected in the options market this week, in which investors have scooped up large amounts of buy or call options, suggesting they see prices rising. Data from the Intercontinental Exchange shows that open interest in calls that give the owner the right to buy Brent futures at $80 and $85 by next week grew by nearly 45% on Monday and Tuesday to an equivalent of 54-million barrels of oil.

Oil cartel Opec and other producers, including Russia, meet on September 23 in Algeria to discuss how to allocate supply increases within their quota framework to offset the loss of Iranian supply. US sanctions affecting Iran's oil exports come into force on November 4 and many buyers have already scaled back Iranian purchases. But it is unclear how easily other producers can compensate for any lost supply.

However, concern over supply overshadowed a surprise increase in US oil inventories. US crude stockpiles rose by 1.2-million barrels to 397.1-million in the week to September 14, the American Petroleum Institute (API) said.

Official inventory data from the US Energy Information Administration (EIA) will be released on Wednesday. 

Reuters

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