Crude oil prices shot to a four-year high on Tuesday, catapulted by imminent US sanctions on Iranian crude exports and the apparent reluctance of OPEC and Russia to raise output to offset the potential hit to global supply.
Brent crude futures were up 61 cents at $81.81 a barrel by 11:21am GMT, having touched a session peak of $82.20, the highest price since November 2014.
The oil price is on course for its fifth consecutive quarterly increase, the longest stretch of gains since early 2007, when a six-quarter run led to a record high of $147.50 a barrel.
US crude futures were up 30 cents at $72.38 a barrel, close to their highest since mid-July.
The United States will target Iran’s oil exports with sanctions from November 4, with Washington applying pressure on governments and companies around the world to fall into line and cut their purchases.
“Iran will lose sizeable export volumes, and given OPEC+ reluctance to raise output, the market is ill-equipped to fill the supply gap,” Harry Tchilinguirian, global head of commodity markets strategy at French bank BNP Paribas, told the Reuters Global Oil Forum on Tuesday.
Mohammad Barkindo, secretary general of the Organization of the Petroleum Exporting Countries (OPEC), said in Madrid on Tuesday that it is important for OPEC and its partners, including Russia, to cooperate to ensure they do not “fall from one crisis to another”.
The International Energy Agency forecasts strong oil demand growth of 1.4 million barrels per day (bpd) this year and 1.5 million bpd in 2019, and said in its most recent report that the market was tightening.
US President Donald Trump has demanded that OPEC and Russia increase oil supplies to make up for the expected fall in Iranian exports. Iran is the third-largest producer in OPEC.
OPEC and Russia, however, have so far rebuffed such calls.
The so-called “OPEC+” group, which includes the likes of Russia, Oman and Kazakhstan, met at the weekend to discuss a possible increase in crude output, but the upshot of the gathering was that the group was in no rush to do so.
“After the weekend’s meeting, the voices of those who foresee $100 a barrel and compare the current backdrop to the 2007/2008 bull run are getting louder,” said PVM Oil Associates strategist Tamas Varga.
“Undoubtedly the oil market is expected to be tight in coming months and, if OPEC’s own numbers are to be believed, global oil inventories are to fall during the remainder of the year.”
Richard Robinson, manager of the Ashburton Global Energy Fund, said higher prices are almost certainly on the cards.
“We believe the combination of tight supply, healthy demand, falling global inventories – down from already under-stored levels – and anaemic spare capacity helps support an oil price that could end the year above $90,” he said.