The United States plans to impose new sanctions against Iran, which produces around 4 percent of global oil supplies, after abandoning an agreement reached in late 2015 which limited Tehran’s nuclear ambitions in exchange for removing U.S.-Europe sanctions, Reuters reported.
Oil prices rose sharply in response to the announced measures.
Brent crude futures, the international benchmark for oil prices, hit their strongest since November 2014 above $77.80 per barrel at 0421 GMT on Thursday.
U.S. West Texas Intermediate (WTI) crude futures also marked a November-2014 high, at $71.75 a barrel at that time.
In China, which is Iran’s single biggest buyer of oil, Shanghai crude futures posted their biggest intra-day rally since their launch in March, rising more than 4 percent to a dollar-denominated record of around $73.40 per barrel.
Analysts had little hope that opposition to the U.S. action would prevent sanctions from going ahead.
U.S. bank Goldman Sachs said renewed sanctions and risks to supplies elsewhere, especially in Venezuela, meant there was a high possibility of higher prices than the bank’s summer Brent price forecast of $82.50 per barrel.
The threat of new sanctions come amid an oil market that has already been tightening due to strong demand, especially in Asia, and as top exporter Saudi Arabia and top producer Russia have led efforts since 2017 to withhold oil supplies to prop up prices.
U.S. crude inventories fell by 2.2 million barrels in the week to May 4, to 433.76 million barrels, according to the Energy Information Administration (EIA), slightly above the 420 million barrels five-year average level.
One factor that could prevent markets from tightening further is soaring U.S. oil output.
Weekly U.S. crude oil production hit another record last week, climbing to 10.7 million barrels per day (bpd).
That’s up 27 percent since mid-2016 and means U.S. output is creeping ever closer to that of top producer Russia, which pumps around 11 million bpd.