Brent crude price reached $75 a barrel at one point on Tuesday, for the first time since November 2014.
According to analysts, the possibility of sanctions on Iran has been the most significant driver of the oil price rally in recent weeks. Additionally, the cut in production by Russia and The Organization of the Petroleum Exporting Countries (OPEC), coupled with robust oil demand growth, have also virtually eliminated the global oil glut that worked to push down prices.
OPEC and its non-OPEC partners are now receiving greater acknowledgment for showing market discipline. Shale oil is no longer the most important price-setting factor, and pessimism regarding demand is significantly reduced.
Last year, a group of oil producing countries- including OPEC and non-OPEC producers led by Russia- agreed to cap output by about 1.8 million bpd in a deal running from January last year until the end of 2018. OPEC oil output fell in March to an 11-month low due to declining Angolan exports, Libyan outages and a further slide in Venezuelan output.
Oil prices are likely to gain strength if OPEC and their non-OPEC partners maintain their production cuts. Prices are also set to rise if the geo political tensions continue and if demand from China remains robust.
OPEC, however, came under fire from the U.S President Donald Trump earlier this week when he tweeted that the crude prices are “artificially very high”. The president was criticizing the cartel’s move to cap output, which has contributed to the rise in prices.