Oil climbs on Middle East unrest, with Brent notching another multiyear high

Ever since US shale producers burst on to the scene in 2014 Opec has struggled to cope

Global benchmark Brent gained $1.11 to settle at $78.23 a barrel. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.5% at $71.33 a barrel.

Much of the Iran's oil exports head to Asia now, with over than 1.5 million barrels per day sent to the likes of China, Japan, South Korea, and India.

"We expect the EIA report to display bearish results amidst higher rig counts and production levels in the USA", said Singapore-based brokerage Phillip Futures.

With renewed US sanctions looming against OPEC-member Iran and oil demand strong, analysts said crude markets will likely remain tight for much of the year.

Moreover, in a monthly oil market report released Monday, the Organization of the Petroleum Exporting Countries (OPEC) raised its forecast for global oil demand in 2018, expecting the world to consume 98.85 million barrels a day, or 1.65 million barrels a day higher than previous year.

Now the United States has announced it will impose sanctions on Iran over its nuclear program, raising fears that markets will face shortages later this year when trade restrictions come into effect.

These risks, including the re-imposition of oil sanctions against Iran, and the upcoming results of May elections in Venezuela, may materialise into actions that remove oil supplies from the global market, and in turn, tighten global oil balances.

"For now, the rapidly changing geopolitical landscape will move the attention away from stocks as producers and consumers consider how to limit volatility in the oil market", the IEA said.

The Organization of the Petroleum Exporting Countries reduced its forecast for global oil production in its most recent report.

The data poses worries that near-record high refinery runs may be short-lived.

OPEC, for its part, estimated that the excess oil inventories in the OECD had shrunk to just 9 million barrels.

The pending US sanctions against Iran have also contributed to the price rise. High oil prices and low finding cost in the region which has relatively shallow wells help drive exploration in the farm belt where an average well produces 40-50 barrels-a-day over a 15-20 year life span.

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