The higher crude prices that have followed have prompted growth in rival supply and a flood of USA shale output.
USA crude prices are at the steep discount to Brent as a more than 25 percent rise in US crude production to 10.7 million barrels per day has left the American market well supplied.
President Trump's decision to pull the USA out of the Iran nuclear deal "constitutes a major geopolitical shift" which could trigger a move in the direction of "stagflation", a global strategy team at Citi, led by Mark Schofield, said in a research note, CNBC reported. After prices slipped in Monday morning trade, Brent futures climbed as high as $78.20 a barrel, with WTI climbing close to around $71.13 a barrel.
Brent crude traded at $77.32 per barrel, while the USA light crude rose slightly to $70.80 per barrel.
A lot will depend on how other major oil consumers respond to Washington's action against Tehran, which will take effect in November.
Oil prices were stable on Tuesday as ongoing production cuts by OPEC and looming US sanctions against Iran threatened to tighten the market amid signs of ongoing strong demand. Strong growth in demand due to a robust world economy has helped remove the glut.
"Fast-growing USA tight oil production is increasingly faced with costly logistical constraints in terms of outtake capacity from land-locked production sites", Organization of the Petroleum Exporting Countries said.
OPEC has also predicted that United States drillers outside its group will pump 59.62 million barrels per day this year, or 1.72 million barrels a day more than last year.
The most recent EIA study, included in the agency's short-term energy outlook, showed that global production of oil outside Iran averaged 92.4 million barrels per day from February to March, compared to 91.0 million bpd from 2015 to 2017.
The surge in oil prices comes at a time of tight supply amid record Asian demand and voluntary output restraint by the Organisation of the Petroleum Exporting Countries and non-OPEC producers, including Russian Federation. "However, after a period of a considerable growth, uncertainties seem to be on the rise", said the report.
While Iran has given European nations a two-month window in which to guarantee that the nuclear deal will remain intact, the U.S.'s hawkish national security adviser John Bolton said Sunday that the U.S.is prepared to impose sanctions on European companies if their governments don't heed President Trump's demand to stop dealing with Iran. The deal to keep 1.8 million barrels a day off the market is set to last through the end of the year.
"The oil market was underpinned in April by renewed geopolitical issues, tightening product inventories and robust global demand", OPEC said in its report.