Oil prices were little changed on Tuesday after Brent hit its highest level since November 2014, supported by strong demand, oil cartel Opec-led production cuts, and the prospect of renewed US sanctions on Iran.
Brent traded as high as $75.47 and was up 4c at $74.75 by 3.58pm GMT. West Texas Intermediate (WTI) crude slipped 9c to $68.55, retreating from the November 2014 high it hit on Thursday. WTI’s discount to Brent was as wide as $6.27 Tuesday, its largest since January 5, on rising US production.
The US will decide by May 12 whether to quit a nuclear deal with Iran and re-impose sanctions, tightening global supplies.
Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda, said new sanctions against Tehran "could push oil prices up as much as $5 a barrel". US President Donald Trump warned Iran on Tuesday not to follow through with threats to restart its nuclear programme, as he and French President Emmanuel Macron struggled to find common ground on saving the 2015 Iran nuclear deal.
"Prices are being driven up by tight supply due to high production outages in Venezuela, plus the cuts implemented by Opec and Russia," said Carsten Fritsch, analyst at Commerzbank. "What is more, demand appears robust."
Growing US demand, indicated by continued strong refinery utilisation rates, is very supportive to prices, said Bob Yawger, director of energy futures at Mizuho. "You could get rid of all of these geopolitical headlines — Syria, trade — and if you did that, you would still have a very impressive demand situation in the US."
Brent prices were at their highest since November 27 2014. Opec’s decision that day not to curb output subsequently sent prices plunging. Oil began recovering in 2016 as Opec discussed a return to market management with the help of Russia and other non-members. A deal to rein in output started in January 2017 and has been deepened by a steep output drop in Venezuela.
Meanwhile, demand in Asia, the biggest oil-consuming region, has risen to a record high.
The latest US inventory figures are expected to show a 2.6-million barrel drop in crude stocks. The American Petroleum Institute (API), an industry group, releases its inventory data at 8.30pm GMT on Tuesday, a day before the government’s supply report.
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