Oil prices fell on Wednesday, weighed down by ample supplies despite ongoing output cuts by producer cartel OPEC and looming USA sanctions against major crude exporter Iran.
Brent, the global benchmark, rose as much as 1% at $79.47 per barrel around 8:30 a.m. ET.
Brent crude oil reached an intraday peak of $79.47 a barrel, up $1.24 and its highest since November 2014, before retreating to $78.70, up 47 cents, by 1:12 p.m. EDT (1712 GMT). The rising oil prices are also giving the government a headache as a chunk of its annual budget will now be required in its purchase, thereby compromising on other social sectors.
Despite these downward forces, the market retains support from OPEC and other producers' production cuts and US sanctions on Iran.
The United States last week withdrew from an global nuclear accord with Iran and announced renewed sanctions against the country.
China, France, Russia, Britain, Germany and Iran all remain in the nuclear accord that placed controls on Iran's nuclear program in exchange for a relaxation of economic sanctions against Iran and companies doing business there, Reuters reported.
With renewed USA sanctions looming against OPEC-member Iran and oil demand strong, analysts said crude prices were well supported.
Russia's largest oil producer, in which British oil major BP owns a 19.75 stake, said production of liquid hydrocarbons, or oil and gas condensate, stood at 4.57 million barrels per day (bpd) in the first three months of 2018. Investors are watching whether OPEC and its allies such as Russian Federation intend to end output cuts and increase production if renewed American measures restrict the Persian Gulf state's exports. "This time around, we expect much less of an impact".
"The API inventory data in the USA fits with. a topping pattern - or at least a decent pause - for oil prices at the moment", said Greg McKenna, chief market strategist at futures brokerage AxiTrader.
"We expect the EIA report to display bearish results amidst higher rig counts and production levels in the USA", said Singapore-based brokerage Phillip Futures.
The surge in oil prices comes at a time of tight supply amid record Asian demand and voluntary output restraint totaling 1.8 MMBPD by the Organization of the Petroleum Exporting Countries and non-OPEC producers, including Russian Federation.
On the other hand, USA production is growing at a pace that made traders hesitate last week after Baker Hughes reported yet another increase in drilling rigs.