LONDON (Reuters) – Oil prices hit a 3-1/2-year high on Tuesday, supported by tight supply and planned U.S. sanctions against Iran that are likely to restrict crude oil exports from one of the biggest producers in the Middle East.
Brent crude oil LCOc1 reached an intraday peak of $79.47 a barrel, up $1.24 and its highest since November 2014, before easing to $78.28, up 5 cents, by 1345 GMT.
U.S. light crude was 15 cents lower at $70.81 a barrel, also not far off its highest since November 2014.
World oil prices have surged by more than 70 percent over the last year as demand has risen sharply but production has been restricted by the Organization of the Petroleum Exporting Countries, led by Saudi Arabia, and other producers including Russia.
Now the United States has announced it will impose sanctions on Iran over its nuclear program, raising fears that markets will face shortages later this year when trade restrictions come into effect.
Norbert Rücker, head of macro and commodity research at private bank Julius Baer, said that at the top of everyone’s mind was “the potential impact on Iranian oil exports and thus the risk of another meaningful supply disruption”.
In China, the world’s biggest oil importer, refinery runs rose nearly 12 percent in April compared with a year earlier, to around 12.06 million barrels per day (bpd), marking the second-highest level on record on a daily basis, data showed.
U.S. crude oil production from shale formations is slated to rise by another 144,000 barrels per day next month, according to the federal Energy Information Administration.
- Their latest Drilling Productivity Report projects that production from shale formations will grow to 7.18 million barrels per day in June, with slightly over half the new production coming from the Permian Basin.