Oil prices rose on May 4 but stayed below recent highs as global supplies remained tight and the market awaited news from Washington on possible new U.S. sanctions against Iran.
Brent crude oil was up 10 cents at $73.72 a barrel by 1315 GMT. The benchmark contract hit a 3-1/2 year closing high of $75.17 on Monday.
U.S. light crude was 15 cents higher at $68.58.
“The energy complex is entering a consolidation phase as a wait-and-see approach takes hold ahead of next week’s Iranian sanctions waiver deadline,” said Stephen Brennock, analyst at London brokerage PVM Oil Associates. “Expectations that the United States will pull out of the (Iran nuclear) deal and refrain from extending sanctions relief are keeping both crude markers near three-year peaks.”
ANZ analysts Daniel Hynes and Soni Kumari said Brent could reach $80 a barrel by the end of this year, attributing recent strength to rising geopolitical risks and tighter global supply.
“We expect the market to tighten even further in second half 2018,” they wrote in a note to clients.
Investors are concerned that sanctions against Iran could cut oil supplies.
Iran’s foreign minister said on May 3 that U.S. demands to change its 2015 nuclear agreement with world powers were unacceptable as a deadline set by President Donald Trump for Europeans to “fix” the deal loomed.
Trump has said that unless European allies rectify the “terrible flaws” in the international accord by May 12, he will refuse to extend U.S. sanctions relief for the oil-producing Islamic Republic.
“Prices reflect a premium for Iran uncertainties. Investors are worried about supplies after Iran took a tough stance in its response to the United States,” said Wang Xiao, head of crude research with Guotai Junan Futures.
European powers still want to hand Trump a plan to save the Iran nuclear deal next week. But they have also started work on protecting EU-Iranian business ties if the U.S. president makes good on a threat to withdraw.
Iran resumed its role as a major oil exporter in January 2016 when international sanctions against Tehran were lifted in return for curbs on Iran’s nuclear program.
Aside from security concerns, growing U.S. crude supplies are capping price gains.
Surging production in the Permian shale basin is outpacing pipeline capacity, while local refining issues have exacerbated oversupply in the region.
The United States now produces more crude oil than top exporter Saudi Arabia.
The stacked pay basin has tantalized oil and gas producers as technical advances started to tame high variability, costs and frustrations.
Rice Acquisition Corp. II, the latest Daniel Rice-led SPAC, recently filed for an IPO to raise $300 million targeting a transaction in the “broadly defined energy transition or sustainability arena.”
The announcement comes on the heels of the formally announced Oil Sands Pathways to Net Zero initiative by a group of Canadian oil and gas producers, which analysts say screens favorably for the project.