Oil Prices Hit $80, Highest Since 2014

Aaron Brown
May 18, 2018

It stood at $79.39 as of 8:20 pm Nigerian time.

The IEA said global oil demand would average 99.2 million bpd in 2018, although US bank Goldman Sachs said consumption would cross 100 million bpd "this summer".

Even at $80 per barrel, the costs of oil are huge, with Asia's consumption costing $1 trillion a year, twice as much as during the price lull of 2015/2016. Saudi Arabia has indicated it could be ready to step in to meet any shortfalls arising from the USA sanctions against Iran.

Oil rose to $80 a barrel in London for the first time since 2014 as USA crude inventories fell and traders braced for the impact of renewed sanctions on OPEC member Iran.

PREMIUM Global oil prices rose to their highest levels in three-and-a-half years in the aftermath of United States President Donald Trump's announcement that the USA will pull out of the Iran nuclear deal.

The prospects of a drop in Iranian oil exports due to sanctions imposed by the USA after pulling out from the Iran nuclear deal has moved the prices northwards.

"The geopolitical noise and escalation fears are here to stay", said Norbert Rücker, head of macro-and commodity research, at Swiss bank Julius Bär. "We continued to receive support from concerns about supply from the Iranian nuclear accord, Venezuela.as well as the draw in crude", McGillian said.

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"This is the only way to protect us from a unilateral decision", he said.

Recall that economists warn that rising oil prices pose a danger to the current economic expansion and may reduce the effects recently enacted United States economic stimulus.

Prior to Thursday's oil-price rally, crude futures had already been rising strongly thanks to steady demand growth and a landmark deal by oil producing countries, both inside and outside the OPEC cartel, to lower output. The International Energy Agency trimmed estimates for demand growth, and boosted those for supply, as prices have jumped to three-year highs.

While futures prices climb, physical crude markets are sagging under the weight of unsold barrels.

"Oil has risen 51 percent in the previous year, driven by coordinated supply cuts and, this month, by concern over Iranian supply after the United States said it would reimpose sanctions on Tehran over its nuclear activities".

Senior market analyst Fiona Cincotta at City Index said that although the increased United States production is putting pressure on the oil prices, they are now overshadowed by the lack in production from both Iran and Venezuela.

"We are back to the situation where we were before the 2016 agreement and in the meantime Iran has grown its exports by 1 million barrels a day", Pouyanne said.

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