Oil hits 3-1/2 year high after US quits Iran deal

LONDON: Oil prices rose more than 3 percent on Wednesday to 3-1/2 year highs, after U.S. President Trump abandoned a nuclear deal with Iran and announced the "highest level" of sanctions against the OPEC member.

Ignoring pleas by allies, Trump on Tuesday pulled out of an international deal with Iran that was agreed in 2015, a move that raises the risk of conflict in the Middle East and casts uncertainty over oil supplies in an already tight market.

Brent crude oil touched its highest since November 2014 at $77.20 a barrel.

The benchmark contract was up $1.80 a barrel, or 2.4 percent, at $76.65 by 1240 GMT.

U.S. light crude was up $1.70 a barrel, or almost 2.5 percent, at $70.76, near highs also last seen in late 2014.In China, the biggest single buyer of Iranian oil, Shanghai crude futures hit their strongest in dollar terms since they were launched.

"Iran´s exports of oil to Asia and Europe will almost certainly decline later this year and into 2019 as some nations seek alternatives in order to avoid trouble with Washington and as sanctions start to bite," said Sukrit Vijayakar, director of energy consultancy Trifecta. Iran re-emerged as a major oil exporter in 2016 after international sanctions against it were lifted in return for curbs on its nuclear programme, with its April exports standing above 2.6 million barrels per day (bpd).

That made Iran the third-biggest exporter of crude within the Organization of the Petroleum Exporting Countries, behind Saudi Arabia and Iraq.

Walking away from the deal means the United States will likely re-impose sanctions against Iran after 180 days, unless some other agreement is reached before then.

Analysts´ estimates of the possible reduction in Iranian crude supplies as a result of any new U.S. sanctions range from as little as 200,000 bpd to as much as 1 million bpd, with most impact from 2019 as sanctions take time to be imposed. Several refiners in Asia said on Wednesday they were seeking alternatives to Iranian supplies.