Oil holds gains as markets tighten amid OPEC cuts, Iran sanctions

Oil holds gains as markets tighten amid OPEC cuts, Iran sanctions

Global benchmark Brent crude futures for the July delivery rose by 0.8 percent to $78.93 per barrel, marking a new high after hitting a 3-1/2 year high of $78.53 during the previous session.

US light crude was 5 cents higher at $71.01 a barrel, also not far off its highest since November 2014.

This has jolted global markets and sent oil prices soaring to a multi-year high.

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.

When sanctions were imposed by the Obama administration on Tehran in 2012, Iran's oil exports dropped to roughly 1.5 million barrels per day (MMBPD).

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

OPEC also said OECD commercial crude oil stockpiles had declined in March to 9 million barrels above the five-year average.

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Iran now provides approximately 4 percent of global crude supplies and is the third-biggest manufacturer in the OPEC.

Now the United States has announced that 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.

Commodities portfolio manager Greg Sharenow stated that any reduction in Iranian supply might worsen market deficits, which would suggest upward pressure on pricing.

Minister of Oil and Gas of Oman Dr. Mohammed bin Hamad Al-Rumhi noted that the oil market still has an excess stock, but it is close to reaching a balance.

World oil prices have surged by more than 70 percent over the past year as demand has risen sharply but production has been restricted by the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, and other key producers including Russian Federation.

Oil service giant Baker Hughes reported on Friday the number of rigs operating in American oil fields rose by 10 to a total of 844.

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