Oil price soars due to reduced global supply and improved economy across the world as well. Oil prices higher since they fell below $30 a barrel in early 2016 which led to recession in some Organization of Petroleum Exporting Countries (OPEC) countries like Nigeria. The rising tide has lifted the price of the international benchmark, Brent crude, above $76.
Benchmark prices for American crude oil cracked $70 a barrel on Sunday, the first time they have climbed that high since 2014. This is coming as investors see the prospect of President Trump pulling the United States (U.S) out of an international agreement that eased sanctions on Iran in exchange for restrictions on its nuclear programme.
In recent months, oil prices have risen to levels not seen in about four years, reflecting a steady, albeit volatile, ascent to a fresh peak, after a global glut of crude sent energy markets into a tailspin in 2014. The recent rally comes amid the possible reinstatement of sanctions on Iran; however, a number of factors have fueled U.S. benchmark oil’s march to a perch above $70 a barrel.
OPEC efforts since the start of last year to curb global production have had the biggest influence on crude values, along with growing demand for oil and Venezuela’s output woes.
In recent trading, West Texas Intermediate crude for June delivery CLM8, +1.43 per cent was up 81 cents, or 1.2 per cent, at $70.53 a barrel on the New York Mercantile Exchange, after tapping a high of $70.76. Prices, based on the front-month contracts, haven’t reached or settled at levels this high since late November 2014. Four key reasons for the rally in oil prices include the OPEC-non-OPEC crude-oil production curbs.
According to James Williams, an Energy Economist, “The number one reason is the OPEC/non-OPEC accord led by the Saudis and Russians to limit production and lower the exceptionally-high petroleum stocks at the time of the agreement.”
Under the deal, which was implemented at the start of last year and runs through the end of this year, OPEC and other major oil producers, including Russia, agreed to cut crude production by roughly 1.8 million barrels a day from late 2016 levels in an effort to eliminate a longstanding glut of global supplies