Brent Crude Hits New High On Soaring Demand

April FrancisMay 16, 2018

Oil prices retreated just below multi-year highs hit early in the day on Tuesday, supported by concerns that US sanctions on Iran are likely to restrict crude oil exports from one of the biggest producers in the Middle East.

Brent crude futures were at $78.22 per barrel at 0644 GMT, down 21 cents, or 0.3 percent, from their last close.

WTI's June contract was 67 cents higher at $71.63/bbl on the New York Mercantile Exchange as of 8:57 a.m. local time, after rising 26 cents on Monday.

U.S. President Donald Trump's withdrawal from a 2015 nuclear accord with Iran has driven oil to the highest since November 2014.

Additionally, the market retreated as the US dollar strengthened against other currencies to the highest since December.

USA light crude was 60 cents higher at $71.56 a barrel, also close to its highest since November 2014.

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Crude futures hit the highs as the markets anticipated a sharp fall in Iranian crude supply once US sanctions take effect later this year.

Oil price steadied below a three-and-half year highs yesterday as resistance emerged in Europe and Asia to United States sanctions against major crude exporter, Iran. The cartel also said its output rose slightly last month, mainly via Saudi Arabia, but raised its demand forecast for next year by 25,000 barrels per day to average 98.85 million barrels per day. Investors are watching whether OPEC and its allies such as Russian Federation intend to end output cuts and increase production if renewed American measures restrict the Persian Gulf state's exports.

Greg McKenna, chief market strategist at futures brokerage AxiTrader, says it is still "far from certain" that sanctions "will bite in the way intended". The production growth may be far from over, contributing to USA crude´s discount to Brent, analysts said.

World oil prices have surged by more than 70 percent over the a year ago 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 Russian Federation.

On the other hand, US production is growing at a pace that made traders hesitate last week after Baker Hughes reported yet another increase in drilling rigs.

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