Oil holds near November 2014 highs, eyes bull flag breakout

Oil prices were stable on Tuesday as ongoing production cuts by OPEC and looming US sanctions against Iran threatened to tighten the market amid signs of ongoing strong demand.

Global benchmark Brent crude futures for the July delivery rose by 0.8 percent to $78.93 per barrel, marking a new high after hitting a 3-1/2 year high of $78.53 during the previous session. USA light crude was 5c higher at $71.01 a barrel, also not far off its highest since November 2014.

With renewed USA sanctions looming against OPEC-member Iran, analysts said crude prices were well supported.

World oil prices have surged by more than 70% over the previous year as demand has risen sharply but production has been restricted by oil cartel Opec, led by Saudi Arabia, and other key producers, including Russian Federation.

Further, the possibility of reduced exports from Iran after renewed United States sanctions is also keeping oil close to November 2014 highs and the technical chart also shows a bull flag setup - a bullish continuation pattern.

"The commitment of Saudi Arabia and the rest of OPEC to the production cuts is a major factor in supporting the price at the moment as well as the possibility of reduced exports from Iran due to sanctions", said William O'Loughlin, investment analyst at Rivkin Securities. However, the cartel also revised higher the non-OPEC supply forecast by 10,000 barrels per day, which does not come as a surprise given the rising USA oil output.

Analysts noted that uncertainties remain in the oil market due to strong global demand expectations, geopolitical tensions and stabilizing US production growth in the second quarter.

The price of world benchmark Brent crude has risen over the past 28 months, from roughly $26 a barrel in early 2016, to approximately $77/Bbl Monday, as the balance between supply and demand continues to tighten, Kallanish Energy understands.

OPEC data presented on Monday showed that crude stockpiles from members of the Organization for Economic Co-operation and Development (OECD) was down to 9 million barrels above the 5-year average and lower than the 340 million barrels above the average in January 2017.