Oil prices continue to surge to new four-year high as 2m Iranian barrels go off the market

Increased demand and restricted supply caused oil prices to soar today with Brent crude oil reaching $79 (£58) per barrel which is the highest since November 2014.

Demand for oil drastically increased prices and has resulted in oil prices increasing by more than 70 per cent over the last year.

After the plans for the US to pull out of the Iran nuclear deal became known, oil prices surged over the uncertainty of what would happen to Iran’s oil industry if the US reimposed sanctions, limiting Iran’s production.

Read more: Oil prices under pressure since Trump’s Iran announcement

According to chief executive at Sun Global Investment Mihir Kapadia, so far 2m barrels of oil previously produced by Iran has been taken off the market.

The Organisation of the Petroleum Exporting Countries (Opec), has not restricted the number of barrels available but has not made up for the loss of barrels from Iran.

Senior oil and gas equity analyst Iain Reid at Macquarie Group said that the reason for the market being as tight as it is at the moment is due to Opec failing to “open the floodgates” to compensate for the lost Iranian barrels, but also the decline in production in Venezuela, another Opec nation.

China, which is the world’s biggest importer of oil, saw refinery runs rise 12 per cent in April compared to the same time last year to about 12m barrels of oil per day.

The supply is greater in the US were production has now seen a large increase in production bringing the total of barrels produced per day to 10.7m.

Kapadia thinks that the reason for the change in the last 24 hours can be attributed to geopolitical tension. He said that Brent crude oil could rise as high as $85 (£63) per barrel, but predicted that they would not drop below $69.70 (£52).

Read more: Oil prices remain at four-year high ahead of Trump’s Iran decision