Oil price surges past $80 a barrel to highest level in three and a half years

Trump's decision to withdraw the US from the Iran deal has helped boost the value of crude oil in recent weeks

The resumption of sanctions on Iran has led to supply fears (REUTERS)

The price of crude oil surged past $80 a barrel on Thursday, hitting a three and a half year peak.

Global benchmark brent crude rose 1 per cent on the previous day’s trading to hit $80.07, helped along by the news that Total is threatening to pull out of its Iran gas field deal.

Another factor fuelling the rally is a fall in US inventories, which have dropped sharply in recent months.

However the strongest support for the oil price in recent weeks has been US President Donald Trump’s decision to withdraw from the Iran nuclear deal.

The resumption of sanctions on the Middle Eastern state has raised concerns over supplies, compounded by the collapsing Venezuelan oil market, which could be set for more trouble if the US reacts strongly to this weekend’s presidential election in the cash-strapped country.

Fears that supplies could be dwindling have pushed the price of oil up, with some traders now speculating that brent crude could hit $100 a barrel.

“Fundamentally the price looks well supported here, OPEC are showing they are in no rush to end production cuts, Venezuela’s oil industry is collapsing under its economic and political crisis and US sanctions aimed at Iran’s oil industry are kicking in,” said Fiona Cincotta, senior market analyst at City Index.

“Could oil go higher? Venezuela’s problems are unlikely to be resolved anytime soon and could be exasperated if the Trump aims sanctions at the troubled country following rigged and unfair elections; also if the US can get China to loosen energy ties with Iran, then regardless of increased US shale production, the price could close in on $100.”

However, on the more pessimistic side of the market, some analysts believe the price has reached a peak at the $80 mark.

“There is now a firmer consensus around the potential impact of lost Venezuelan/Iranian exports, and as such, we see little to drive benchmarks much higher in the immediate term,” said Jack Allardyce, oil & gas analyst at Cantor Fitzgerald Europe.

“While global inventories are approaching long-run averages (suggesting that the coordinated OPEC/non-OPEC supply cuts have been successful), there is a building concern over demand growth, partially on account of higher prices.

“In short, it feels that fundamentals have found a bit of balance, although firmer indications of the impact of renewed sanctions on Iran may well change the picture.”