Oil fell on Wednesday ahead of an anticipated rise in USA crude inventory that could provide more evidence that demand may be slowing in spite of ongoing crude output cuts by producer group OPEC and imminent US sanctions against Iran, Reuters reports. It stood at $79.39 as of 8:20 pm Nigerian time.
Although the global economy remains robust, oil prices have surged about 75% since last June, and "it would be extraordinary if such a large jump did not affect demand growth" the IEA said.
An agreement between Saudi-led OPEC and Russian Federation on cutting oil production has helped push the price of oil from below $30 in 2016 to hit $80 on Thursday - the highest in almost four years. The WTI crude is also up at $71.78 per barrel.
On May 8 President Donald Trump announced his decision to withdraw the USA from the Iran nuclear deal, also pledging to reinstate the anti-Iranian sanctions that were lifted as a result of the agreement.
"The geo-political noise and escalation fears are here to stay", said Norbert RŶcker, Head of Macro & Commodity Research, at Swiss bank Julius Baer. "Supply concerns are top of mind after the U.S. left the Iran nuclear deal".
Further supporting prices, Royal Dutch Shell (RDSa.L) on Thursday said it was halting crude exports from a major Nigerian pipeline.
The bottleneck in North America likely contributed to a 4.9 million barrel rise in USA crude oil inventories, to 435.6 million barrels, that the private American Petroleum Institute reported on Tuesday.
The International Energy Agency (IEA) said on Wednesday it had lowered its global oil demand growth forecast for 2018 from 1.5 million barrels per day (bpd) to 1.4 million bpd.
"US shale can not solve the current oil supply problems", it said, arguing that USA oil would not be sufficient to offset production losses from Iran, Venezuela and Angola.
Over the last three years, the two countries have been a seesaw of production.
The U.S. has said it is possible there will be secondary sanctions imposed on European companies who continue to deal with Iran.
US bank Morgan Stanley said it had raised its Brent price forecast to $90 per barrel by 2020 due to a steady increase in demand.
"Though Iran is unlikely to give back all the production gains charted since the [Joint Comprehensive Plan of Action] nuclear deal removed sanctions in 2016, they are likely to see steady declines ahead, joining Venezuela in the ranks of OPEC members suffering from involuntary production losses", said Fraser.
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.