London: Brent prices hit $80 (Dh294) a barrel on Thursday for the first time since November 2014 on concerns that Iranian exports could fall due to renewed US sanctions and reduce supply in an already tightening market.
Brent crude futures reached an intraday high of $80.18. They were up 58 cents at $79.86 as of 1110 GMT. US West Texas Intermediate (WTI) crude futures were up 57 cents at $72.06 a barrel, also their highest since November 2014.
President Donald Trump’s decision this month to withdraw the United States from an international nuclear deal with Iran and revive sanctions that could limit crude exports from Opec’s third-largest producer has given strong tailwind to oil prices.
France’s Total on Wednesday warned it might abandon a multi-billion-dollar gas project in Iran if it could not secure a waiver from US sanctions, casting further doubt on European-led efforts to salvage the nuclear deal.
A rapid decline in Venezuela’s crude production has further roiled markets in recent months.
“The geopolitical noise and escalation fears are here to stay,” said Norbert Rücker, head of macro and commodity research at Swiss bank Julius Baer. “Supply concerns are top of mind after the United States left the Iran nuclear deal.” Global inventories of crude oil and refined products dropped sharply in recent months due to robust demand and production cuts by the world’s top producing countries.
Oil stocks were expected to drop further as the peak summer driving season nears, offsetting increases in US shale output, said analysts at Bernstein.
“While the sharp rise in US production and rig count has raised questions on the sustainability of inventory draws through 2018, we believe that inventories will continue to draw as we enter the summer driving season in 2018,” they said.
Several banks have in recent days raised their oil price forecasts, citing tighter supplies and strong demand.
But high oil prices could hit consumption, the International Energy Agency warned on Wednesday, lowering its global oil demand growth forecast for 2018 to 1.4 million from 1.5 million barrels per day (bpd).
Asia’s demand is at record highs and with rising prices its crude could cost $1 trillion this year, about twice what it paid during the market lull of 2015/2016.
The IEA said global oil demand would average 99.2 million bpd in 2018, although US bank Goldman Sachs said consumption would cross 100 million bpd “this summer”.
Leading production increases is the United States, where crude output has soared by 27 per cent in the last two years to a record 10.72 million bpd, putting it within reach of top producer Russia’s 11 million bpd.