Oil prices drop further despite OPEC cuts and Iran sanctions

OPEC production cuts and the potential of wide-reaching US sanctions on Iran did little to prevent oil prices dipping further on Wednesday.

The price of Brent crude fell 21 cents to $78.22 on Wednesday, while US West Texas Intermediate was down 28 cents to $71.03 a barrel, although these remain close to November 2014 highs.

Ample supplies in the market and potential production increases by US and European oil giants helped ease recent price hikes.

The slight drop in prices is despite OPEC continuing with oil cuts and saying a global supply glut had nearly been cleared.

New US sanctions on Iran could also threaten the already volatile commodities market. 

Talks have been held between Iran and China about potential trading, but are yet to have reached a conclusion between the two governments, according to Reuters.

A huge boom in oil prices over the past year - with prices rising 75 percent since last July - will also likely have an effect on demand.

"We expect a slowdown in [demand growth in the second half of the year] largely attributable to higher oil prices," the International Energy Agency [IEA] said in a report, according to the Financial Times. 

"Crude oil prices have risen by nearly 75 [percent] since June 2017. It would be extraordinary if such a large jump did not affect demand growth."

It did not rule out price hikes, due to potential production disruptions in Iran and Venezuela.

The US withdrawal from the 2015 nuclear deal with Iran and promises of new sanctions on the country could also lead to increases. 

"The potential double supply shortfall represented by Iran and Venezuela could present a major challenge for producers to fend off sharp price rises and fill the gap, not just in terms of the number of barrels but also in terms of oil quality."

Oil prices dropped sharply from 2014, seeing the price of a barrel reaching lows of $27 due to a huge glut in the market.

OPEC production cuts helped stabilise the market, but they still remain way below the prices needed by some Gulf states to break even.