Oil prices rose to fresh two-and-a-half-year highs today with Brent crude oil climbing above $68 a barrel, on geopolitical tensions in Iran and a tighter market.
Brent crude futures rose to $68.27 a barrel this morning, a high not seen since May 2015, before edging down slightly to $68.18 a barrel at the time of writing. West Texas Intermediate futures, the US benchmark, jumped as high as $62.21 a barrel.
Oil prices are now at about their highest price since the market crashed in 2014, which caused shares in UK-listed firms to rise this morning. Shares in BP were up more than one per cent and Shell's stock was up around 0.75 per cent, while FTSE 250-listed Tullow Oil, Wood Group and Hunting each rose nearly two per cent.
Despite unrest in Iran, the Organisation of the Petroleum Exporting Countries' third-largest producer, the country's oil output has not been affected.
Lee Wild, head of equity strategy at Interactive Investor said markets were pricing in an outside chance that domestic tension in Iran could threaten supply.
"Oilfield strikes look unlikely just now, but Donald Trump could use any brutal crackdown by the regime there to reintroduce sanctions. Do that and Royal Dutch Shell and BP, already at multi-year highs, will go better still."
Analysts at Accendo Markets added that a 5m barrel inventory drawdown in the US reported overnight by the American Petroleum Institute (API) added to bullish sentiment.
"The New Year-delayed official US EIA [Energy Information Administration] Inventories this afternoon will look to repeat the bullish API report overnight," they said.
A cold snap across most of the US has also fuelled a spike in short-term demand, especially for heating oil.
However, oil production in the US has risen by nearly 16 per cent since mid-2016 to hit 9.75m barrels per day at the end of last year.