US oil rose above US$70 a barrel for the first time since November 2014, as traders braced for a reimposition of US sanctions on Middle East crude producer Iran.
Futures in New York and London jumped as much as 1.4 percent.
While US President Donald Trump has threatened he would pull out of a deal between Iran and world powers as a Saturday deadline nears, he has signaled he would be open to negotiation.
The 2015 accord eased sanctions on OPEC’s third-largest member in exchange for curbs on its nuclear program, and renewed US measures might stifle the Middle East nation’s crude exports.
Iran has come out against higher prices, after a rally of more than 12 percent this year on output cuts by OPEC and its allies, as well as rising geopolitical risks in the Middle East.
Crude at US$60 to US$65 a barrel is “suitable,” an Iranian official said on Sunday, signaling a split with fellow OPEC member Saudi Arabia, which is said to be aiming for US$80 oil.
The group is to meet next month in Vienna.
“Fresh sanctions, which would remove some of Iran’s crude supplies from the global market, will tighten the balance between demand and supply, and support crude prices,” Japan Oil, Gas & Metals National Corp chief economist Takayuki Nogami said by telephone from Tokyo. “While there could be profit-taking given current oil prices, it will be limited as concerns over Iran are rising.”
West Texas Intermediate (WTI) oil for delivery next month climbed as much as US$0.97 to US$70.69 a barrel on the New York Mercantile Exchange, and traded at $70.41 at 2:53pm in Singapore. Total volume traded was about 61 percent above the 100-day average. Prices rose 2.4 percent last week.
Brent for July settlement rose US$0.68 to US$75.55 a barrel on the London-based ICE Futures Europe exchange. Prices climbed 0.3 percent last week. The global benchmark crude, which is also on course for the highest close since November 2014, was at a US$5.29 premium to July WTI.
Yuan-denominated futures for September delivery rose 2.9 percent to 460 yuan (US$72.27) per barrel on the Shanghai International Energy Exchange. The contract climbed 0.6 percent last week.
While refusing to reveal what he will do on Saturday, Trump reiterated his belief the existing accord is “a horrible agreement for the United States,” but “that doesn’t mean I wouldn’t negotiate a new agreement.”
Meanwhile, the US’ European allies continue to back the deal, saying it has been essential to reining in Iran’s nuclear program.
Iran has for months been preparing for the possibility that Trump will pull out of the nuclear agreement, Iranian President Hassan Rouhani said, adding that the US would quickly come to regret such a decision.
The constant fluctuation in oil prices is destabilizing for future investment and security of supply, Iranian Oil Minister Bijan Namdar Zanganeh said.
Energy market consultant FGE has said that sanctions on Iran could cut its output by up to 500,000 barrels a day by the end of this year.
Since sanctions were eased in January 2016, Iran’s crude production has nearly doubled, while exports last month soared to record levels.
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