Crude prices hit a 3-1/2-year high on Tuesday as investors digested OPEC's monthly report for April and news on planned fresh U.S. sanctions against Iran.
International benchmark Brent crude oil reached $79.02 a barrel, up 79 cents and its highest since November 2014. By 0955 GMT, Brent was up 70 cents at $78.93. U.S. light crude was 40 cents higher at $71.36 a barrel, also close to its highest since November 2014, according to Reuters.
Last week, Washington reimposed sanctions against Tehran, one of the biggest oil producers in the Middle East, with many European and Asian countries disapproving of the move.
“Oil prices are touching fresh multi-year highs as robust demand prospects coupled with a tense geopolitical backdrop make for a potent bullish cocktail,” Stephen Brennock, analyst at London brokers PVM Oil Associates told Reuters.
"The impact is more for the crude oil price, because Iran now is exporting about 2.6 million barrels (per day), and if we go back to the first sanctions, they were exporting 1.5 million" Italian oil and gas giant ENI CEO Claudio Descalzi told CNBC's Hadley Gamble on the sidelines of the ADNOC Downstream Investment Forum in Abu Dhabi on Sunday.
"So there is a lack of 1 million in the market and that is going to impact the oil price, and also the balance of different crudes," the CEO said. "Because 1 million is going to Europe, the rest to the Far East."
Meanwhile, OPEC stated it has raised its global demand and global supply outlooks for 2018. The organisation expects the world to consume 98.85 million barrels a day, up 1.65 million barrels a day from last year.
“The oil market was underpinned in April by renewed geopolitical issues, tightening product inventories and robust global demand,” OPEC said in its report. The report also showed OPEC for now is cutting more supply than the group has pledged under the January 2017 pact.
OPEC members had pledged in November 2016 to reduce their crude output by 1.2 million barrels a day in an effort to drawdown a global stock overhang and rebalance supply and demand. Several non-OPEC countries, including Russia, joined the pact, pledging an additional cut of nearly 600,000 barrels a day. The pact started in January 2017 and will run until the end of 2018.
OPEC output rose by just 12,000 barrels per day (bpd) to 31.93 million bpd in April, according to figures OPEC collects from secondary sources. That is roughly 800,000 bpd less than the amount OPEC says the world needs from the group this year.