Oil rallies to fresh 3-year high

Scott Olson/GettyJeremy Beck works on a drilling as he and a crew from George Mitchell Drilling search for oil for Houston, Texas based Vintage Exploration in a corn field October 9, 2004 near Okawville, Illinois. High oil prices and low finding cost in the region which has relatively shallow wells help drive exploration in the farm belt where an average well produces 40-50 barrels-a-day over a 15-20 year life span. Vintage Exploration, which has about 20 producing wells, is one of many small oil companies operating in the region.

Oil prices rose to fresh multi-year highs Tuesday morning after OPEC said it cut supply more than expected and as markets poised for sanctions on Iran.

Brent, the international benchmark, rose as much as 1% at $US79.47 per barrel around 8:30 a.m. ET. West Texas Intermediate was up 0.86% to $US71.89 a barrel. Both haven’t hit those levels in more than three years.

OPEC on Monday reported it’s cutting production by more than is required. The cartel also said its output rose slightly last month, mainly via Saudi Arabia, but raised its demand forecast for next year by 25,000 barrels per day to average 98.85 million barrels per day.

Elsewhere, supply concerns have been mounting over the last week after President Donald Trump the US pulled out of the Iran nuclear deal – a move that reimposes sanctions on Iranian barrels.

Brent is up 50.96% over the year.

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