Oil rises one per cent on tightening crude supply, upbeat economic data

Oil prices rose one per cent as involuntary supply cuts from Venezuela and Iran plus conflict in Libya supported perceptions of a tightening crude market, while upbeat Chinese economic data eased concerns about waning crude demand.

The oil market also followed global stock markets higher after strong earnings at JPMorgan Chase & Co. The dollar index slipped to its lowest against the euro in more than two weeks, making crude cheaper for nonUS buyers.

“Equities are getting off to a good start with earnings season and the dollar index being weaker helps reaffirm confidence in the oil market,” said Phil Streible, senior commodities strategist at RJO Futures in Chicago.

Brent crude oil futures rose 72 cents, or 1.02 per cent, to settle at US$71.55 a barrel. US West Texas Intermediate (WTI) crude futures ended the session up 31 cents, or 0.5 per cent, at US$63.89 a barrel.

Both benchmarks notched a weekly gain of about one per cent, which was Brent’s third consecutive week of gains and the sixth straight rise for WTI.

Oil markets have been lifted by more than 30 per cent this year by supply cuts led by the Organization of the Petroleum Exporting Countries and US sanctions on oil exporters Iran and Venezuela, plus escalating conflict in OPEC member Libya.

“Geopolitically infused rallies could shoot prices toward or even past the US$80 per barrel mark for intermittent periods this summer,” RBC Capital Markets said in a note.

The head of Libya’s National Oil Corporation warned on Friday that renewed fighting could wipe out crude production in the country.

Bombing by a war plane occurred on Friday near the Mellitah oil and gas plant, jointly operated by Italy’s ENI and Libyan state oil firm NOC, a Libyan National Army ( LNA) military source and residents said. The plant supplies Italy with gas through the Greenstream pipeline.

OPEC and its allies meet in June to decide whether to continue withholding supply. Though OPEC’s de facto leader, Saudi Arabia, is considered keen to keep cutting, sources within the group said it could raise output from July if disruptions continue elsewhere.

The producer group’s supply cuts have been aimed largely at offsetting record crude production in the US.