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Oil prices rose on Thursday, supported by expectations that the United States will re-impose sanctions against Iran, decline in Venezuela output and ongoing strong demand.
Brent crude oil futures were at 74.27 per barrel at 0643 GMT, up 27 cents, or 0.4 per cent, from their last close. US West Texas Intermediate (WTI) crude futures were up 14 cents, or 0.2 percent, at $68.19 per barrel.
Sanctions against Iran
Traders said markets climbed on expectations that the United States will in May re-impose sanctions against Iran, a major oil producer and member of the Organization of the Petroleum Exporting Countries (OPEC).
French President Emmanuel Macron had said on Wednesday that he expected US President Donald Trump to pull out of a deal with Iran reached in 2015, in which Iran suspended its nuclear programme in return for western powers lifting crippling sanctions.
Trump will decide by May 12 whether to restore US sanctions on Tehran, which would likely result in a reduction of its oil exports.
Further pushing oil prices has been declining output in Venezuela, OPEC's biggest producer in Latin America.
Venezuela's crude production has fallen from almost 2.5 million barrels per day (bpd) in early 2016 to around 1.5 million bpd due to political and economic turmoil.
Contract dispute with PDVSA
US oil major Chevron Corp has evacuated executives from Venezuela after two of its workers were imprisoned over a contract dispute with state-owned oil company PDVSA.
Venezuela's plunging output and looming US sanctions against Iran come against a backdrop of strong demand, especially in Asia, the world's biggest oil consuming region. However, not all market indicators point towards tighter supplies.
US crude oil inventories rose 2.2 million barrels in the week to April 20, to 429.74 million barrels. That's almost 10 million barrels above the five-year average.
US crude output
US crude production climbed by 46,000 barrels per day (bpd) on the previous week, to 10.59 bpd. That's an increase of more than a quarter since mid-2016.
American crude oil output has overtaken that of top exporter Saudi Arabia. Only Russia currently produces more, at around 11 million bpd.
The soaring US output has made WTI crude around $6 per barrel cheaper than Brent, the international benchmark for oil prices.
Dutch bank ING said “the wide discount for WTI to Brent saw exports rising 582,000 bpd week-on-week to a record high of 2.33 million bpd.”
With US output and exports surging, some analysts warn that the 20-per cent climb in Brent prices since February is starting to look overdone.
“The market does look a little toppish,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.
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