By Laila Kearney
NEW YORK (Reuters) – Brent crude touched $75 per barrel on Thursday for the first time in nearly six months as quality concerns halted some Russian crude exports to Europe while the United States prepared to tighten sanctions on Iran.
Brent crude futures climbed 28 cents to $74.85 a barrel by 12:10 p.m. EDT (1610 GMT) after hitting a high of $75.60 earlier in the session, the highest since Oct. 31.
U.S. West Texas Intermediate crude fell 15 cents to $65.74 a barrel, after hitting a session high of $66.28.
Wednesday’s report of a bigger-than-expected build in U.S. crude inventories last week to their highest since October 2017 was weighing on the U.S. benchmark, analysts said.
Poland and Germany suspended imports of Russian crude via the Druzhba pipeline due to contamination. The pipeline can ship up to 1 million barrels per day, or 1 percent of global crude demand. About 700,000 bpd of flow was suspended, according to trading sources and Reuters calculations.
(GRAPHIC: Druzhba Pipeline Map – https://tmsnrt.rs/2DytnnM)
“We consider the quality issues with Russian crude oil as a supply disruption that is happening at the same time sanctions on Iran and Venezuela are impacting supply,” said Andy Lipow, president of Lipow Oil Associates in Houston.
The United States this week said it would end all exemptions for buyers of Iranian oil. OPEC’s third-largest producer has been under U.S. sanctions for more than six months, but several major buyers, including China and India, were given temporary exemptions until this week. Beginning in May, those countries have to halt oil imports from Tehran or face sanctions.
The decision follows supply cuts by the Organization of the Petroleum Exporting Countries and non-member producers, including Russia, since the start of the year aimed at propping up oil prices.
Still, Brian Hook, U.S. special representative for Iran and senior policy adviser to the secretary of state, said on Thursday “there is plenty of supply in the market to ease that transition and maintain stable prices”.
Consultancy Rystad Energy said Saudi Arabia and its main allies could replace lost Iranian oil.
“Saudi Arabia and several of its allies have more replacement barrels than what would be lost from Iranian exports,” said Rystad’s head of oil research, Bjoernar Tonhaugen.
The cuts led by OPEC are in part a response to ballooning U.S. crude production, currently at a record 12.2 million bpd, making the United States the world’s biggest producer.
(GRAPHIC: U.S. oil drilling, production & storage levels – https://tmsnrt.rs/2DxgF8W)
(Additional reporting by Ahmad Ghaddar in London, Henning Gloystein in Singapore; Editing by Dale Hudson and Marguerita Choy)