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Oil trades near 4-year high as Iran export drop stokes concerns

[LONDON] Oil traded near the highest level in almost four years as investors grapple with doubts over the Organization of Petroleum Exporting Countries' (Opec) ability to replace falling exports from Iran.

Futures rose 0.2 per cent in New York after closing Monday at the highest since November 2014. Iranian crude and condensate exports declined to their lowest in 2 1/2 years before the impending return of US sanctions. Meanwhile, the new US-Mexico-Canada Agreement, which superseded the 24-year-old North American Free Trade Agreement, eased some concerns about global commerce.

"The market's very keen to figure out the size of impact from the Iranian supply disruptions and whether Saudi Arabia and Russia are able to make up for the losses," Kim Kwangrae, a commodities analyst at Samsung Futures, said by phone. "At the same time, the US-Mexico-Canada Agreement is also improving the overall sentiment for oil."

Crude has rallied about 16 per cent since mid-August as supply losses from Iran to Venezuela continue to rattle global markets. Opec and its allies also show little enthusiasm for boosting output despite President Donald Trump's demand for lower prices.

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"It shows that the market is not convinced about the ability of the producers' group to replace Iranian barrels," said Tamas Varga, an analyst at PVM Oil Associates in London.

West Texas Intermediate (WTI) for November delivery rose 17 US cents to US$75.47 a barrel on the New York Mercantile Exchange at 8.59am local time. The contract surged 2.8 per cent to US$75.30 on Monday. Total volume traded was about 19 per cent below the 100-day average.

Brent for December settlement fell 19 US cents to US$84.82 a barrel on the London-based ICE Futures Europe exchange, after rising US$2.25 to US$84.98 on Monday. The global benchmark crude traded at a US$9.60 premium to WTI for the same month.

Observed shipments of crude and condensate from Opec member Iran dropped to 1.72 million barrels a day in September, down 260,000 barrels a day from the previous month, according to tanker-tracking data compiled by Bloomberg. That's the lowest since February 2016. With sanctions due to resume on Nov 4, the sharp drop-off in supply from the Persian Gulf state has helped buoy crude oil prices.

In the Americas, the new trade agreement was secured just before a Sunday midnight deadline, allowing leaders from the three nations to sign the deal by late November. While trade tensions still remain, the deal caps a turbulent time for the US and Canada, traditionally close allies on national security and trade.

BLOOMBERG