Oil prices have continued to rise as the market comes to terms with the potential re-introduction of US sanctions on Iran.
The crude futures have hit their highest levels in three and a half years after US President Donald Trump chose to come out of the nuclear deal reached with Iran in 2015 and made his intentions clear to renew sanctions on the OPEC member.
Brent crude futures soared 0.9% to trade at $77.89 per barrel, while US West Texas Intermediate (WTI) crude futures also jumped 0.9% to reach $71.78, according to Reuters.
Both futures recorded their strongest levels since November 2014.
In response, Shanghai crude futures registered their biggest intra-day rally since their launch in March this year.
Analysts are resigned to the fact that opposition to the US sanctions on Iran from certain quarters will not prevent sanctions from being enforced.
Energy consultancy FGE was quoted by the news agency as saying: “Europe and China will not fight against the US sanctions. They will grumble and accept it. There is no one who will realistically choose Iran over the US.”
The tightness experienced by the market is also supported by production issues in Venezuela as a result of political and economic turmoil in the country.
The looming Iran sanctions will only add to the tightness and it will affect exports from the country, which is a major crude exporter.
FGE founder and chairman Fereidun Fesharaki said: “Oil prices will certainly move up, and $90-$100 per barrel prices may again be on the cards.”
Meanwhile, data released by the Energy Information Administration (EIA) pointed to a dip in the US crude inventories by 2.2 million barrels in the week ending 4 May, to 433.76 million barrels.
Despite the resurgence in the oil prices, the higher rise is likely to be capped by increasing US production.
US crude oil output increased to 10.7 million barrels per day during the same week.
In terms of crude production, the US stands only behind Russia, which is the highest producer.