Oil Holds Near Four-Year Highs

Oil held just below four-year highs on Thursday, supported by the imminent loss of Iranian supply through U.S. sanctions, but also tempered by the prospect of a rapid production increase from Saudi Arabia and Russia.

Brent crude oil futures were down 33 cents at $85.96 a barrel by 1430 GMT, having risen to a late 2014 high of $86.74 on Wednesday. U.S. crude futures fell 53 cents to $75.88.

"Prices will probably rise further into overshoot territory. Once we see $90 I would expect decisive supply reaction," Commerzbank strategist Carsten Fritsch told the Reuters Global Oil Forum.

"Major economies won't let oil prices rise to triple digits and harm economic growth."

Nitin Gadkari, India's transport minister, said his country faced "economic crisis" due to its huge oil imports, two local TV channels reported.

India imports more than 4 million barrels per day (bpd) of oil and is one of the biggest buyers of Iranian crude, along with China, and has been hurt by a slide in the rupee against the dollar.

Saudi Energy Minister Khalid al-Falih said OPEC was able to raise output by 1.3 million bpd, but offered no signal that the producer group would do so.

Not all members of the Organization of the Petroleum Exporting Countries have the scope to raise output enough to offset any supply losses stemming from U.S. sanctions on Iran.

Russia and Saudi Arabia struck a private deal in September to raise oil output, Reuters reported on Wednesday, before consulting with other producers including the rest of OPEC.

The impact of oil prices at their highest in four years, together with dollar strength, is starting to show on demand.

"We have argued recently that reaching the $100/bbl market would be a tall order. We still maintain this view but sometimes it makes more sense to put a time rather than a price limit on a rally," PVM Oil Associates strategist Tamas Varga said.

"About the end of November we will have a good idea as how many barrels will be lost due to the launch of the second round of the Iranian sanctions. By that time all the bullish news will be in the market."

Reporting by Amanda Cooper