OPEC says oil glut nearly gone, makes supply pledge amid Iran worries

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LONDON, May 15 (Reuters) - Oil prices hit a 3-1/2-year high on Tuesday, supported by tight supply and planned USA sanctions against Iran that are likely to restrict crude oil exports from one of the biggest producers in the Middle East.

The Organization of the Petroleum Countries said in its monthly report Monday that petroleum stockpiles in the developed world stand just 9 million barrels above the five year average - a sign that the glut that weighed on the market for years is almost gone.

President Trump's decision to pull the US 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.

Brent crude futures, the worldwide benchmark for oil prices, were at $78.21 per barrel at 0639 GMT, virtually unchanged from their last close and not far off a three-and-a-half year high of $78.53 a barrel reached the previous session.

USA light crude was 5 cents higher at $71.01 a barrel, also not far off its highest since November 2014.

On Monday, OPEC forecasted that U.S. oil production will account for most of the growth in the industry this year. Russia, which is the top producer, pumps about 11 million barrels a day.

According to the group, United States drillers will account for about 89 per cent of that growth, with Canada, Brazil, the UK and Kazakhstan also pumping more.

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The latest OPEC data also suggested that the global oil glut had been significantly cut, with oil inventories in developed nations falling to 9 million barrels above the five-year average at the end of April.

"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.

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.

OPEC added that the U.S. trade policy and sanctions are fuelling that uncertainty at a time when there are concerns that rising interest rates, especially in the United States, could crimp economic growth.

OPEC will discuss whether the production caps should be adjusted at a meeting next month.

Referring to President Donald Trump's decision to withdraw from the Iran nuclear deal, OPEC said: "So far, the impact on the global economy has been minor and negligible, but the build-up of potentially disruptive concerns has increased".

This estimated growth rate was revised higher by 25,000 barrels per day compared to last month's estimates.