LONDON – Brent crude prices climbed past $80 a barrel Thursday, as Washington’s decision to reinstate sanctions on Iran continued to fuel a rally that has pushed the market to 3½-year highs.
Brent crude, the global oil benchmark, was up 0.7 percent at $79.83 a barrel on London’s ICE Futures exchange, having early moved past $80, its highest level since Nov. 2014.
“There’s a minimum of 400,000 barrels per day of Iranian exports at risk,” said Amrita Sen, an analyst at consultancy Energy Aspects.
On the New York Mercantile Exchange, West Texas Intermediate futures were up 0.9 percent at $72.14 a barrel.
Thursday’s gains came as European companies pull back from Iran.
Europe’s firms had said they would stand by the 2015 international nuclear agreement that saw sanctions against Iran eased in return for Tehran curbing its nuclear program.
Washington dropped out of that pact last week, sending oil sharply higher on the belief that Iranian supply will be curbed when crude inventories are already falling.
If European companies pull out of investments, Iran will question the point of sticking by the agreement, Sen added.
The United States has said it is possible there will be secondary sanctions imposed on European companies who continue to deal with Iran.
French energy major Total SA said Wednesday that it would withdraw from a major gas project in Iran before November if it wasn’t granted a waiver by the US.
Total had signed a $1 billion deal to develop Iran’s South Pars field.
The London P&I Club, which advises shippers on insurance, published a note Wednesday recommending its members seek guidance from the US Treasury before entering into Iran-related deals.
Any barrels lost from Iran will exacerbate an already tight market, analysts said.
Brent prices have climbed almost 20 percent in 2018, boosted by output cuts from major producers and increased tensions in the Middle East.
Global oil stocks in the Organization for Economic Cooperation and Development countries hit their lowest level in three years in March, the International Energy Agency said Wednesday.
“The current market deficit points to a further decline in stocks,” Commerzbank said in a daily note.
Investors were also monitoring the economic crisis in Venezuela, which has seen a steep fall in the country’s oil production, adding to supply concerns.
Nymex reformulated gasoline blendstock – the benchmark gasoline contract – rose 0.5 percent to $2.26 a gallon.
ICE gasoil changed hands at $698.75 a metric ton, up $14 from the previous settlement.