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Oil boosted by Iran fears, remains below multi-year highs

Reuters  |  NEW YORK 

By Jessica Resnick-Ault

NEW YORK (Reuters) - prices retreated just below multi-year highs hit early in the day on Tuesday, supported by concerns that U.S. sanctions on are likely to restrict exports from one of the biggest producers in the

reached an intraday peak of $79.47 a barrel, up $1.24 and its highest since November 2014, before retreating to $78.70, up 47 cents, by 1:12 p.m. EDT (1712 GMT).

U.S. light crude was 15 cents lower at $70.81 a barrel, also not far off its highest since November 2014, in a volatile session.

The difference between the two grades briefly widened to more than $8 a barrel, the widest gap since April 2015, reflecting surging U.S. crude supplies and a greater geopolitical risk to Brent-based crudes.

"U.S. have flip-flopped on a strong dollar," said Phil Flynn, at in "is pricing in the idea that all the risk to supplies is overseas - there's a concern that all the supplies that are tight in are only going to get tighter."

World have surged more than 70 percent over the last year as demand has risen sharply while production has been restricted by the Organization of the Petroleum Exporting Countries, led by Saudi Arabia, and other producers, including

The has announced it will impose sanctions on over its nuclear program, raising fears that markets will face shortages later this year when trade restrictions take effect.

will restart its uranium enrichment if it cannot find a way to save the 2015 nuclear deal with the after the pulled out last week, said on Tuesday.

The tightening market has all but eliminated a global supply overhang that depressed crude prices between late 2014 and early 2017.

Surging prices were capped after reported weaker-than-expected investment and in April and a drop in home sales, clouding its economic outlook even as policymakers try to navigate debt risks and defuse a heated trade dispute with the

The data poses worries that near-record high refinery runs may be short-lived. China's refinery runs rose nearly 12 percent in April from a year earlier, to around 12.06 million barrels per day, marking the second-highest level on record on a daily basis, data showed.

Additionally, the market retreated as the U.S. dollar strengthened against other currencies to the highest since December. As the dollar strengthens, investors can retreat from dollar-denominated commodities like oil.

Despite these downward forces, the market retains support from OPEC and other producers' production cuts and U.S. sanctions on Iran.

OPEC figures published on Monday showed in industrialized nations in March fell to 9 million barrels above the five-year average, from 340 million barrels above the average in January 2017.

U.S. crude is trading at a hefty discount to Brent, the international marker, thanks to sharp rises in U.S. production to 10.7 million bpd, which has left the American domestic well supplied.

U.S. is expected to rise by about 145,000 bpd to a record 7.18 million bpd in June, the said on Monday.

(Additional reporting by in Singapore and Christopher Johnson in London; Editing by and Dan Grebler)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, May 15 2018. 22:58 IST
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