Oil prices set a new high on Thursday, with Brent crude surpassing $80 a barrel, on lingering concerns about oil supply disruption from Iran on renewed U.S. sanctions and warnings from France’s Total.
Brent crude leaped to a top of $80.15 a barrel, the highest level since November 2014, on mounting expectations that Iran oil exports would be hit sharply on re-imposition of U.S. sanctions.
Oil prices have risen strongly in recent weeks after President Donald Trump’s decision to pull out from Iran’s nuclear deal.
Total warned on Wednesday it would leave a multi-billion gas project in Iran if it could avoid U.S. sanctions, killing hopes that Europe might convince the U.S. to come back to the nuclear deal.
Aside from the geopolitical concerns, there are other factors that are helping oil prices to extend their rally, most notably the strengthening crude demand from Asia.
Demand from Asia is currently at record high, but this may not persist for a long period as the higher prices could prompt Asian economies to lower their demand.
At $80 per barrel, Asia’s demand would cost $1 trillion this year, according to Reuters.
Global demand for oil would decrease to 1.4 million barrels, the International Energy Agency said on Wednesday. That was a cut from previous estimates of 1.5 million barrels, as the higher prices would weigh on consumption.
The U.S. increasing output could compensate the expected gap from Iran, as production soared to a record high of 10.27 million barrels per day.
Oil prices got some support yesterday after a report showing U.S. crude inventories dipped by 1.4 million barrels last week, surpassing forecasts of 1.1 million-barrel decrease.
Brent prices have risen more than 28 percent since mid-February and 195
percent since the low of $29.07 hit in January 2016.