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Planned Iran sanctions, tight supply send oil to new multi-year high

Reuters  |  LONDON 

By Christopher Johnson

LONDON (Reuters) - hit a 3-1/2-year high on Tuesday, supported by tight supply and planned U.S. sanctions against that are likely to restrict exports from one of the biggest producers in the

Benchmark Brent reached $78.60 a barrel, up 37 cents and its highest since November 2014. By 0800 GMT, Brent was up 20 cents at $78.43.

U.S. light crude was 5 cents higher at $71.01 a barrel, also not far off its highest since November 2014.

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

Now the has announced that it will impose sanctions on over its nuclear programme, raising fears that markets will face shortages later this year when trade restrictions come into effect.

"The commitment of and the rest of OPEC to the production cuts is a major factor in supporting the price at the moment as well as the possibility of reduced exports from due to sanctions," said William O'Loughlin, at

Global is rising sharply.

In China, the world's biggest oil importer, refinery runs rose nearly 12 percent in April compared with the same month a year ago, to around 12.06 million barrels per day (bpd), marking the second-highest level on record on a daily basis, data showed on Tuesday.

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

OPEC figures published on Monday showed that in industrialised nations in March fell to 9 million barrels above the five-year average, down 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 barrels per day, 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.

The Permian basin in Texas, the biggest U.S. oil patch, is expected to see output climb 78,000 bpd to a fresh record of 3.28 million bpd.

(Additional reporting by in Singapore; Editing by Susan Fenton)

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

First Published: Tue, May 15 2018. 14:02 IST