US crude rises 1%, settling above $74 for first time since Nov 2014 as sanctions on Iranian oil loom

• Oil prices rose as U.S. sanctions against Iran threatened to remove a substantial volume of oil from world markets.
• OPEC and Russia have said they will raise output to meet demand, but many analysts think that the extra supply may be inadequate.
• A Canadian production outage disrupted the North American market.

Oil prices rose on Friday as U.S. sanctions against Iran threatened to remove a substantial volume of crude from world markets at a time of rising global demand.

U.S. West Texas Intermediate (WTI) crude ended Friday's session up 70 cents, or 1 percent, at $74.15, its best closing price since Nov. 24, 2014. WTI hit a session peak of $74.46, also its highest level since November 2014.

Brent crude rose $1.59, or 2 percent, to $79.44, just shy of a 3½-year closing price.

"All the potential shortfalls could outstrip the production increase agreed to by OPEC and Russia," said Dominick Chirichella, Director of Risk Management at EMI DTN. There's a risk that supplies from Iran could be cut further as there's pressure on other countries to join the United States in sanctions, he said.

Iran is the fifth-largest oil producer in the world, pumping about 4.7 million barrels per day (bpd), or almost 5 percent of world's oil, much of it to China and other energy-hungry nations such as India.

The U.S. government wants to stop Tehran exporting oil to cut off a vital supply of finance and hopes other big oil producers in the Organization of the Petroleum Exporting Countries and Russia will make up for the deficit.

But the world oil market is already tight and many analysts and big investors think strict enforcement of U.S. sanctions against Iran will push up prices sharply.

But the world oil market is already tight with unplanned disruptions in Canada, Libya and Venezuela removing supply.

Many analysts and investors think strict enforcement of U.S. sanctions against Iran will push up prices sharply.

"It is becoming increasingly clear that Saudi Arabia and Russia will struggle to compensate for potential losses in oil production from the likes of Venezuela, Iran and Libya," said Abhishek Kumar, analyst at Interfax Energy in London.

Vienna-based consultancy JBC Energy said the stronger the implementation and enforcement of U.S. sanctions, the higher the oil price will go. "Triple-digit oil prices are not off the table," JBC said.

A Reuters survey of 35 economists and analysts on Friday forecast Brent would average $72.58 a barrel in 2018, 90 cents higher than the $71.68 forecast in last month's poll and compared with the $71.15 average so far this year.

North American oil stocks have fallen as an outage at Canada's Syncrude has locked in more than 300,000 bpd of production. The outage is expected to last at least through July, according to operator Suncor Energy.

Outside North America, record demand and voluntary supply cuts led by OPEC have pushed up prices. Unplanned supply disruptions from Libya to Venezuela have further tightened the market.

Libya's National Oil Corporation (NOC) said on Friday it expects to declare force majeure on loadings from the eastern ports of Zueitina and Hariga from July 1, raising losses in output from a power struggle over oil exports to 800,000 bpd

OPEC and Russia have said they will raise output to meet demand and replace crude from unplanned disruptions but many analysts think that the extra supply may be inadequate.

Major buyers of Iranian oil, including Japan, India and South Korea, have indicated that they may stop importing Iranian crude if U.S. sanctions are imposed.

Until then, however, Asia is buying as much Iranian oil as possible. Imports of Iranian crude oil by major buyers in Asia rose in May to the highest in eight months. China, India, Japan and South Korea last month imported 1.8 million bpd from Iran, up 15 percent from a year ago.

— CNBC's Tom DiChristopher contributed to this report.