$70 per barrel? What happens next?

Now that crude oil has hit the $70 per barrel mark, the first time in more than three years, what happens next? The last time Brent traded that high, prices were falling off a cliff after the November 2014 OPEC meeting left members producing without restraint, leading to a global glut of supply.

Brent, the international benchmark for oil prices spiked to $70.05 in morning trade, touching its highest level since December 4, 2014, when the contract hit $70.60. US WTI finished the session up 23 cents at $63.80, after breaking through $64 a barrel for the first time since December 2014. The contract topped out at $64.77, a high going back to December 8, 2014.

Some analysts are now suggesting $80 is achievable if the Organization of the Petroleum Exporting Countries (OPEC) and its allies stay disciplined in limiting output.

Oil prices have been supported by stronger-than-expected demand fueled by worldwide economic growth, ongoing output limits by OPEC and Russia and a series of global events that have stoked geopolitical tension.

A rally that began in June accelerated in December, with prices rising about 15 percent over roughly the last month.

Still, there are a number of factors that could push oil prices much higher. Those include supply disruptions from Iran, which faces the threat of renewed US sanctions, and Venezuela, where economic crisis is whittling away its ability to pump oil.

The price gains also set up a potential quandary for OPEC – higher prices mean higher incomes for cash-strapped members, but risk encouraging further production by US shale producers, which may in turn grab a larger slice of global market share.

No help from Trump yet

President Trump has declined to fully scrap the Iran nuclear deal, but will issue a deadline to Congress to come up with a solution. Every three months the president needs to issue waivers on sanctions on Iran, and with a deadline imminent, many analysts expected Trump to take the drastic move of declining to issue the waiver, which would have likely led to new sanctions and a return to confrontation between the US and Iran.

Oil analysts have projected US sanctions could threaten several hundred thousand barrels per day of Iranian oil production, but unilateral action from Washington would not be as effective as the coordinated international sanctions from years ago.

FRANK UZUEGBUNAM