Planned Iran sanctions, tight supply send oil to new multi-year high

Planned Iran sanctions, tight supply send oil to new multi-year high

Crude oil prices have increased more than 10% over the past month after President Donald Trump signaled it is likely the US will withdraw from a 2015 global agreement with Iran that eased sanctions in return for curbs to the country's nuclear program, the Wall Street Journal reports.

A worker fills a tank with subsidized fuel at a fuel station in Jakarta April 18, 2013.

Benchmark Brent crude oil reached $78.60 a barrel, up 37c and its highest since November 2014.

June contract US West Texas Intermediate (WTI) oil futures climbed 0.5 percent to $71.38 per barrel, also not far from its November 2014 high of $71.89 reached last week.

USA crude prices are at the steep discount to Brent as a more than 25 percent rise in US crude production to 10.7 million barrels per day has left the American market well supplied.

President Trump's decision to pull the USA out of the Iran nuclear deal "constitutes a major geopolitical shift" which could trigger a move in the direction of "stagflation", a global strategy team at Citi, led by Mark Schofield, said in a research note, CNBC reported.

Analysts noted that uncertainties remain in the oil market due to strong global demand expectations, geopolitical tensions and stabilizing USA production growth in the second quarter. However, the cartel also revised higher the non-OPEC supply forecast by 10,000 barrels per day, which does not come as a surprise given the rising United States oil output.

The tightening market has all but eliminated a global supply overhang that depressed crude prices between late 2014 and early 2017.

The revised demand growth predictions come at a time when the global crude market is also facing other significant supply-side question marks, such as the impact of the imposition of U.S. sanctions on Iranian output and the ongoing struggles of the Venezuelan oil sector.

OPEC data presented on Monday showed that crude stockpiles from members of the Organization for Economic Co-operation and Development (OECD) was down to 9 million barrels above the 5-year average and lower than the 340 million barrels above the average in January 2017.

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