Oil Trades Near Three-Year High as U.S. Raises Iran Pressure

Oil traded near $82 a barrel as pressure on Iran escalated, with President Trump hardening rhetoric against the country and crude customer India cutting its imports to zero.

Brent futures were little changed in London after settling in the previous session at the highest since November 2014. With U.S. sanctions on Iran taking effect in less than two months, Trump told the United Nations General Assembly on Tuesday that the leaders of the Islamic Republic “sow chaos, death and destruction.” Buyers are increasingly wary of Iranian crude, and India is not planning to import any in November, according to company officials.

Oil prices rose on Monday after OPEC signaled it won’t rush to release more oil into the market, shrugging off pressure from Trump who has been calling on the group to do more to temper gains. The prospect of tightening supplies due to a steep drop in Iran’s exports, Venezuela’s slumping output, and production bottlenecks in the U.S. prompted trading giants Mercuria Energy Group Ltd. and Trafigura Group to warn that oil could surge back above $100 a barrel.

“These ingredients have all the makings of a potent bullish cocktail for the oil market,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd.

Brent for November traded at $81.73 a barrel, down 14 cents, on the ICE Futures Europe exchange at 11:32 a.m. in London, after settling Tuesday at the highest level in almost four years. The global benchmark traded at a $9.60 premium to West Texas Intermediate.

WTI for November delivery fell as much as 45 cents to $71.83 a barrel on the New York Mercantile Exchange and traded at $72.16. The contract climbed 20 cents to $72.28 on Tuesday. Total volume traded was about 27 percent below the 100-day average.

Goldman Sachs Group Inc. said that Brent prices will stabilize in a range of $70 to $80 a barrel as output from other Organization of Petroleum Exporting Countries members and Russia offsets losses in Iran, according to a report by Damien Courvalin and Jeffrey Currie.

Less than a week after Trump criticized OPEC for pushing for higher prices, he blasted the group again on Tuesday saying the cartel is “ripping off the rest of the world,” in a speech to the UN General Assembly in New York. “We want them to stop raising prices. We want them to start lowering prices and they must contribute substantially to military protection from now on,” he said.

Although OPEC and its allies stopped short of pledging an immediate production boost earlier this month, the group’s guidance still implies an incremental 500,000-barrels-a-day increase, Goldman analysts wrote in a note Tuesday. The bank said it believes OPEC and Russia will offset supply losses out of Iran, and a large jump in prices would likely lead to Trump authorizing a release from the country’s strategic reserves.

“Trump demanded in a very strong tone at the United Nations that OPEC push down crude prices, triggering profit taking,” said Takayuki Nogami, chief economist at Japan Oil, Gas and Metals National Corp. Still, “as investors aren’t convinced Trump’s latest call can force OPEC to change its course, prices will unlikely keep falling.”

Other oil-market news:

India is not planning to buy any crude oil from Iran in November, raising the prospect that Tehran will lose another major customer as U.S. sanctions hit. U.S. crude inventories rose 2.9 million barrels last week, the American Petroleum Institute was said to report, despite expectations government data due Wednesday will show a decline of 1.5 million barrels. After South Korea became the first of Iran’s major oil customers to reduce imports to zero, America’s biggest refiner is seeking alternative supplies to fill the gap. A clutch of oil buyers in the world’s top market are facing an existential crisis, forcing them to band together or face the prospect of perishing.