Crude oil prices went down, but remain close to its peak

Crude oil prices went down, but remain close to its peak

The analysts said their target price for Brent, the global benchmark, was $90 for the second quarter of next year.

"There is also a risk of $100/bbl, as our forward balances embed OPEC "tapering" and no major drop in Iranian crude exports", Francisco Blanch, commodity and derivative strategist at the bank said in a report published Wednesday.

President Donald Trump's decision to withdraw from the 2015 nuclear deal risks exposing European countries that have since invested in Iran to renewed USA sanctions after "wind-down" periods of three to six months expire.

Israel and Iran engaged in an extensive military exchange on the heels of Trump's decision to leave the deal.

Michael Wittner, analyst at Societe Generale, forecasts US sanctions will remove 400,000-500,000 bpd of Iranian crude from the global oil market.

Despite this, OPEC's latest report said producers were cutting more than required under the deal, while producers not party to the agreement, such as USA shale companies, were starting to face constraints on future output.

Last week, July WTI crude oil settled at $70.68, up $1.10 or +1.58% and July Brent crude oil finished at $77.12, up $2.25 or +3.01%.

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The two leaders agreed for their teams to hold discussions on the potential impact of United States sanctions on firms doing business in Iran, Downing Street said.

Both oil futures contracts hit their highest since November 2014 last week at $78 and $71.89 a barrel respectively as markets anticipated a sharp fall in Iranian crude supply once US sanctions bite later this year. The International Energy Agency has said "with just under half of global oil supply subject to restraint and oil demand growing steadily, the impact on stocks has been substantial".

"It's the same witches brew of bullish stuff: Iran, Venezuela, the lack of alacrity by Saudi Arabia to bring more oil onto the market", said John Kilduff, partner at Again Capital in NY.

OPEC's agreement is built to stretch as far as the end of 2018.

The production growth may be far from over, contributing to US crude's discount to Brent, analysts said.

Oil prices have climbed to a three-year high as the market prepares for Iranian exports to fall.

"In 2012 the reduction in Iranian crude production and exports was around 1 million bpd", Wittner said. A month later, on June 22-23, OPEC and non-OPEC ministers will meet in Vienna to review their output deal.

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