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Oil rose towards $80 a barrel on Tuesday, supported by concern that falling Venezuelan crude output and a potential drop in Iranian exports could further tighten global supply.
Crude is trading at the highest since late 2014, underpinned by a supply-cutting deal by oil cartel Opec plus Russia and other non-members, and strong global demand.
Brent crude, the global benchmark, rose 63c to $79.85 a barrel by 8.12am GMT. Last week, it topped $80 for the first time since November 2014. US crude was up 42c at $72.66, having earlier traded at $72.72, its highest since November 2014.
“The solid global economy, selected supply disruptions and the upbeat market mood, in particular in oil, frame a positive environment,” said Norbert Rücker, head of commodities and macro research at Julius Bär.
The US government imposed new sanctions on Venezuela following Sunday’s re-election of President Nicolás Maduro, a move that analysts say could further curb the country’s oil output already at its lowest in decades. “We can expect continued falling Venezuelan production,” said Tony Nunan, oil risk manager at Mitsubishi in Tokyo.
Concern about a potential drop in Iranian oil exports following Washington’s exit from a nuclear deal with Tehran and the threat of US sanctions is also supporting prices. On Monday, the US hardened its approach to Iran.
Venezuela and Iran are members of Opec, which, with its allies, has curbed production since January 2017 to get rid of a supply glut that led to a price collapse in mid-2014. Due in part to the involuntary drop in Venezuela’s output, Opec is over-delivering on the agreement. Saudi Arabia and other major Opec producers could, in theory, add more supply, but have yet to do so.
The Opec-led supply curbs have largely cleared an inventory surplus in industrialised countries based on the deal’s original goals, and stocks continue to decline. US crude stockpiles are forecast to have declined by 2.8-million barrels last week, a third straight weekly fall. The American Petroleum Institute’s (API) inventory report for the period is due at 8.30pm GMT.
Limiting the upward pressure on prices is growing supply in the US, where shale production is forecast to hit a record high in June.