LONDON, May 15 (Reuters) - Oil prices hit a 3-1/2-year high on Tuesday, supported by tight supply and planned US sanctions against Iran that are likely to restrict crude oil exports from one of the biggest producers in the Middle East.
Oil prices rose on Monday (May 14) as Opec reported that the global oil glut has been virtually eliminated, while United States crude's discount to global benchmark Brent widened to more than US$7, its deepest in five months.
West Texas Intermediate crude for June delivery was 15 cents higher at $71.11 a barrel on the New York Mercantile Exchange as of 11:36, after rising 26c on Monday. Prices rose 26 cents to close at $70.96 on Monday. South Korea, according to The New York Times, will seek an exemption from US sanctions so that it can continue to import Iranian oil. Those partners now include Russian Federation, one of several non-OPEC members that along with OPEC forged the so-called "Vienna Agreement" to monitor production in order to maintain balance between supply and demand. The global benchmark crude traded at a US$6.34 premium to July WTI. Total volume traded was about 37% below the 100-day average.
Futures for September delivery on the Shanghai International Energy Exchange fell 1.2 percent to 465.5 yuan a barrel.
Total shale spending is expected to rise 20% year on year in 2018 and 16% in 2019, with the bulk of investment expected to flow into the U.S., compared 3.5% for total non-OPEC spending this year and 8.1% the next as producers start to increase their capital expenditure.
The White House has said it will impose sanctions on companies that continue to purchase Iranian oil but allow them six months to wind down those contracts.
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France's oil major "TOTAL" has not yet announced its withdrawal from Iran's oilfields as the company has promised to develop a number of phases of this field.
European countries and companies that continue to do business with Iran could face USA sanctions, National Security Adviser John Bolton said on Sunday.
Forecasts for Iranian supply losses vary from "little impact" anticipated by Barclays Plc to declines of 500,000 to 1.5 million barrels a day predicted by the sources.
Analysts wrote "Looking into the next 18 months, we expect global oil supply to demand balances to tighten driven by the ongoing collapse in Venezuelan output".
- Oil prices are at four-year highs, raising the price of producing gasoline.