(Bloomberg) — Crude rallied to $80 a barrel in London for the first time since late 2014 amid signals that stockpiles of excess oil will continue shrinking around the world.

Futures contracts in London and New York both climbed more than 1% on Thursday. Inventories in the world’s biggest economy withered last week amid unprecedented exports of US oil. As for Opec, leading members have assured traders they have plenty of crude to make up for any losses from sanctioned Iran, though the oil cartel showed no signs of ramping up output.

The worldwide glut has been eradicated and "Opec still hasn’t said anything about ending the deal early, which is only good for markets", said Ashley Petersen, lead oil analyst at Stratas Advisors in New York. As for the US, "we’ve been having plenty of exports to kind of alleviate any sort of glut here. There seems to be just enough crude and it’s all finding a home to go to."

Crude this month has been touching levels last seen more than three years ago as global supplies tighten amid fears over the implications of the Iran nuclear accord break-up. Money managers who are reducing bullish bets on oil are following a "dangerous" strategy, according to Goldman Sachs Group. Demand will remain strong and concerns over economic growth will probably prove temporary, Goldman’s analysts said.

"Supply concerns are top of mind after the US left the Iran nuclear deal," said Norbert Ruecker, head of macro and commodity research at Julius Baer Group in Zurich. "The geopolitical noise and escalation fears are here to stay."

Brent for July settlement jumped 42c to $79.70 a barrel on the London-based ICE Futures Europe exchange, after earlier reaching $80.18, the highest since November 2014. The global benchmark crude traded at a $7.79 premium to West Texas Intermediate for delivery the same month.

West Texas Intermediate for June delivery climbed 36c to $71.85 before midday on the New York Mercantile Exchange. Total volume traded was 21% above the 100-day average.

The Energy Information Administration reported on Wednesday that US crude stockpiles declined for a second week, while fuel inventories fell by the most since early March.

Yet, Total CE Patrick Pouyanne said strong demand could not be maintained at $80 a barrel and the oil market was not fully back in balance.

Pouyanne also said he would not be surprised if the price of crude reached $100 later this year.

"We are in a new world. We are in a world where geopolitics are dominating the market again," Pouyanne said at an event held by a Washington think tank.

A rapid decline in Venezuela’s crude production has further roiled markets in recent months.

Bloomberg

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