Oil rallies to fresh 3-year high

Energy ETF Rally: About More Than Just Iran

Oil climbed to a three-year high near $79/bbl in London on heightened political risks in the Middle East following unrest in Gaza and the return of sanctions against Iran.

Investors also drew attention to statements by Saudi Energy Minister Khalid Al-Falih about their readiness to ensure the stability of the oil market after the US decision to withdraw from the nuclear deal with Iran. American measures could cut the Persian Gulf nation's crude exports, and traders are watching whether OPEC and its allies will end their agreement to curb supply and instead increase production to fill in the gap.

Despite Wednesday's dips and some indicators implying the financial oil has overshot physical oil, overall crude market conditions have tightened since 2017 when the Organization of the Petroleum Exporting Countries (OPEC) started to withhold supplies to push up oil prices.

Oil prices hit a 3-1/2-year high on Tuesday, supported by tight supply and planned US sanctions against Iran that are likely to restrict crude oil exports from one of the biggest producers in the Middle East. Brent crude oil LCOc1 reached $79.22 a barrel, up 99 cents and its highest since November 2014.

West Texas Intermediate crude rose 26 cents to settle at $70.96.WTI´s discount to Brent was as much as $7.28, its widest since December 12 on surging US output. Prices rose 26 cents to close at $70.96 on Monday.

Brent futures advanced as much as 1.6%. Total volume traded was about 37% below the 100-day average.

Brent crude futures were at $78.22 per barrel at 0644 GMT, down 21 cents, or 0.3 percent, from their last close. The global benchmark crude traded at a $7.49 premium to July WTI, heading for the widest spread since 2015. The contract fell 1.2% on Monday. The numbers provided by the group's biggest producer indicate that if the kingdom chose to compensate for Iran, it could increase output by about 190 000 barrels a day and still respect the limit agreed with fellow members.

OPEC on Monday reported it's cutting production by more than is required. With more than 1,200 people wounded by live fire, it was the deadliest day in Gaza since Hamas's last war with Israel in 2014.

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