Oil prices bounced back to their highest levels in more than three and a half years as a result of tightness in the market and planned US sanctions against Iran.

The impending sanctions are expected to curb crude oil exports from Iran, which is a major producer in the Middle East.

Benchmark Brent crude oil soared 37 cents, trading at $78.60 a barrel, while US light crude increased five cents to reach $71.01, according to Reuters.

The Brent future prices represent their highest since November 2014.

The tightness in crude supplies is on account of continuing restrictions on production by the Organization of the Petroleum Exporting Countries (OPEC) and other producers such as Russia.

Over the last year, world oil prices have recorded a growth of more than 70% on the back of growing demand from Asian markets.

“The commitment of Saudi Arabia and the rest of OPEC to the production cuts is a major factor in supporting the price at the moment.”

The planned sanctions on Iran are only expected to add to the existing tightness, with market-watchers expressing concerns of potential shortages later this year.

Rivkin Securities investment analyst William O’Loughlin was quoted by the news agency as saying: “The commitment of Saudi Arabia and the rest of OPEC to the production cuts is a major factor in supporting the price at the moment, as well as the possibility of reduced exports from Iran due to sanctions.”

In China, refinery runs witnessed a month-on-month increase of 12% in April to around 12.06 million barrels per day.

Meanwhile, OPEC data indicated a decline in oil stockpiles in OECD industrialised nations in March to nine million barrels above the five-year average, down from 340 million barrels above the average in January last year.

On the other hand, the American domestic oil market is well supplied due to surging US production.

Government data showed the US shale oil production is projected to surge by about 145,000bpd to 7.18 million barrels per day in June.