Oil traded above 85 dollars a barrel on Wednesday, supported by expectations that U.S. sanctions on Iran will tighten supply and strain the ability of Saudi Arabia and other producers to pump more.
Crude exports from Iran, OPEC’s third-largest producer, are already falling as the U.S. sanctions kicking in on Nov. 4 deter buyers.
The drop in exports is reducing the impact of an OPEC production increase agreed in June.
Brent crude, the global benchmark, was up 38 cents at 85.18 dollars a barrel .U.S. crude was up 24 cents at 75.47 dollars.
With Iranian exports expected to fall further, analysts say there may not be enough spare production capacity in the short term to meet demand, potentially requiring large withdrawals from storage.
The Organisation of the Petroleum Exporting Countries, plus allies including Russia, have been limiting supply since 2017 to get rid of a glut.
They partially relaxed the cut in June, under pressure from U.S. President Donald Trump to cool prices.
OPEC has so far ruled out any further production increase, beyond delivering the boost agreed in June, in spite of prices rallying further and more pressure from Trump.
Russia’s Energy Minister, Alexander Novak, said on Wednesday the market had more or less stabilised but many uncertainties remain, including the sanctions on Iran and could push prices higher.
U.S. crude inventories rose by 907,000 barrels in the week to Sept. 28 to 400.9 million, the American Petroleum Institute said on Tuesday, ahead of Wednesday’s official supply report.