Oil prices fell on Thursday on the prospect of a production increase from Saudi Arabia and Russia and on profit-taking after futures hit four-year highs in the previous session, supported by the imminent loss of Iranian supply through U.S. sanctions.
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.
Saudi Energy Minister Khalid al-Falih said on Thursday the Organization of the Petroleum Exporting Countries was able to raise output by 1.3 million barrel per day, but offered no signal that the producer group would do so.
The kingdom plans to invest $20 billion to maintain and possibly expand its spare oil production capacity, and currently has a maximum sustainable capacity of 12 million bpd.
Brent crude futures fell $1.17, or 1.3 percent, to $85.12 a barrel by 12:11 p.m. EDT (1611 GMT), having risen to a late 2014 high of $86.74 on Wednesday.
West Texas Intermediate (WTI) crude dropped $1.51 to $74.90 a barrel, a 1.9 percent loss.
On Wednesday, Brent climbed to the most technically overbought level since February 2012, while WTI inched higher to the most overbought since January. The relative strength index (RSI) of both contracts rose this week to above 70, a technical level often regarded as signalling a market that has risen too far.
"The market was a bit over-extended on a short-term basis," said Brian LaRose, senior technical analyst at ICAP-TA.
"I would need to see both $84.35 and $82.85 broken (for Brent) to suggest that something more than just a minor rest stop in an ongoing uptrend is likely to take place here."
Also weighing on oil prices, Cushing, Oklahoma, crude inventories rose about 1.7 million barrels from Sept. 28 to Tuesday, traders said, citing a report from market intelligence firm Genscape.
The rise in oil prices to more than $85 and concerns over global trade are putting heavy pressure on emerging economies, International Energy Agency Executive Director Fatih Birol told Reuters.
India is facing an "economic crisis" due to its huge oil imports, two local TV channels cited Transport Minister Nitin Gadkari as saying.
India imports more than 4 million 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.
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 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."