Oil Steady Near 4-Year High as Supply Fears Counter Stock Build

Oil steadied near the highest level in almost four years as fears of a supply crunch outweighed expectations for an increase in American crude inventories.

Futures were trading around $75.50 a barrel in New York, up around 0.4 percent. Supply losses from Iran to Venezuela continued to rattle markets, boosting volatility and driving prices higher. The ongoing outlook for a tightening of crude markets overshadowed forecasts for a second weekly gain in U.S. stockpiles.

Crude has gained more than 20 percent this year on growing concerns that OPEC and its allies can’t pump enough crude to offset losses from American sanctions on Iranian oil. The Persian Gulf state’s exports appear to have declined by more than the market expected, with South Korea, Japan and India already shunning supplies before the sanctions due Nov. 4.

“The rally looks to be a combination of supply tightening from Iran sanctions and an improved demand outlook following the easing of trade sanctions,” said Jens Naervig Pedersen, senior analyst at Danske Bank A/S in Copenhagen.

West Texas Intermediate for November delivery traded 32 cents higher at $75.55 at 9.55 a.m. in London. The contract closed down 0.1 percent Tuesday after rising to the highest close since Nov. 24, 2014 in the previous session. Total volume traded was about 41 percent below the 100-day average.

Brent for December settlement was up 48 cents at $85.28 a barrel on the London-based ICE Futures Europe exchange. The contract dropped 0.2 percent to $84.80 a barrel on Tuesday. The global benchmark crude traded at a $9.75 premium to WTI for the same month.

See also: OPEC Neighbors Struggle to Fill the Gap as Iran’s Exports Falter

While the Organization of Petroleum Exporting Countries struggles to fill the void created by Iran and Venezuela, the talks between Saudi Arabia and Kuwait on restarting two oil fields in a neutral zone are said to have stalled again. The startup could lead to an additional 500,000 barrels a day in production. Currently, most OPEC producers are pumping at, or close to, full capacity, with only Saudi Arabia able to increase output significantly.

In the U.S., crude inventories are estimated to have increased 1.5 million barrels last week, according to a Bloomberg survey of 13 analysts. The responses varied widely, with one analyst forecasting a 3.65 million-barrel gain, while some others predict a decrease of 2.5 million to 3 million barrels. Meanwhile, the industry-funded American Petroleum Institute was said to report stockpiles rose by 907,000 barrels last week.

The API data also pointed to an increase at the U.S. storage hub of Cushing, Oklahoma, of more than 2 million barrels. That would be the largest net build since March if confirmed by the Energy Information Administration’s figures Wednesday.

Other oil-market news: The  Cboe/Nymex Oil Volatility Index has surged almost 19 percent since its recent low in late August. China is set to boost its crude imports from West Africa to the highest in at least seven years this month as the trade war with the U.S. prompts the Asian nation’s refiners to find alternatives. As the shipping industry faces major changes, with tighter rules targeting pollution set to come into effect in 2020, Europe’s  largest refiners are also grappling with their futures. Kazakhstan’s government expects oil output  to rise and billions of dollars of new investment to flow into projects around the country.