Oil prices soar to highest levels since late 2014 on supply concerns

LONDON: Oil prices rose to their highest levels since late-2014 yesterday, boosted by Venezuela’s deepening economic crisis and a looming decision on whether the United States will re-impose sanctions on Iran.

Brent crude oil futures were at US$75.67 per barrel at 1126 GMT, up 80 cents from their last close. Earlier in the session they touched their highest since November 2014 at US$75.89 a barrel.

US West Texas Intermediate (WTI) crude futures rose 84 cents to US$70.56 per barrel. Yesterday was the first time since November 2014 that WTI had climbed above US$70 per barrel.

China’s Shanghai crude oil futures, launched in March, broke their dollarconverted record-high, rising as far as US$72.54 yesterday.

The increases came despite the addition of nine US oil rigs in the week to May 4, bringing the count to a three-year high of 834, according to energy services firm Baker Hughes.

Analysts said a crisis in Venezuela, a major oil exporter, underpinned prices.

“The growth in production in the US is being counterbalanced by the simultaneous decline in Venezuela,” said Commerzbank analyst Carsten Fritsch.

US oil firm ConocoPhillips has moved to take key Caribbean assets of Venezuela’s state-run PDVSA to enforce a US$2 billion (RM7.9 billion) arbitration award, actions that could further impair PDVSA’s declining oil production and exports.

Venezuela’s output has halved since the early 2000s to 1.5 million barrels per day (bpd), as the South American country failed to adequately invest in its oil industry. Widespread expectations that US President Donald Trump will withdraw from the Iranian nuclear pact added further support.

Trump has a May 12 deadline to determine whether to extend sanction waivers.

“It seems that the bureaucratic wheels are turning in Washington to prepare for a sanctions snapback,” RBC Capital

Markets analyst Helima Croft said in a note, adding that “the extraterritorial nature of US sanctions, which cover energy, shipbuilding, finance, trade, insurance, etc., means that ... Iran’s oil exports could credibly be curtailed by 200,000-300,000 bpd.”

On Monday, Saudi Arabian Energy Minister Khalid al-Falih said he is concerned about low oil industry investment and potential shortages in the future. Russian Energy Minister Alexander Novak also pledged Russia’s 100% compliance in May with an Opec-led pact to reduce production. – Reuters