Oil prices hit highest level in nearly 3 years
NEW YORK: The oil price edged higher on Tuesday, touching its highest level since May 2015, supported by OPEC-led production cuts and expectations that US crude inventories have dropped for an eighth week.
OPEC and allies including Russia are keeping supply limits in place in 2018, a second year of restraint, to reduce a price-denting glut of oil held in inventories.
Brent crude touched $68.81 at one point on Tuesday, its highest since May 2015. US West Texas Intermediate crude (WTI) rose 2 percent to $62.97 and also reached its highest since May 2015 at $62.56.
“We expect oil demand growth to outpace non-OPEC supply growth in both 2018 and 2019,” Standard Chartered analysts said in a note.
“In our view, the back of the Brent and WTI curves are both still underpriced. We do not think that prices below $65 per barrel are sustainable into the medium term.”
OPEC is cutting output by even more than it promised and the restraint is reducing oil stocks globally, a trend most visible in the US, the world’s largest and most transparent oil market.
Many producers, still suffering from a 2014 price collapse, are enjoying the rally, although they are wary it will spur rival supply sources. Iran said on Tuesday that OPEC members were not keen on increased prices.
Unrest in Iran, OPEC’s thirdlargest producer, has lent support to prices this year although output and exports have not been affected. Economic collapse is leading to involuntary production cuts in Venezuela, another OPEC member.
There is no sign yet that OPEC is prepared to relax its supply restraint.
A senior OPEC source from a major Middle Eastern oil producer said on Monday OPEC would boost output only if there were significant and sustained production disruptions from Iran and Venezuela.
The rise in prices is expected to drive gains in US production during 2018, offsetting curbs by others.
Some analysts have said a potential rise in US shale oil production could discourage OPEC and Russia from maintaining their deal to curb supply until the end of the year for fears of losing market share.
“I am now on the lookout for bearish technical patterns to emerge on oil prices as I believe they will struggle to go north of $65-$75 per barrel given the above fundamental consideration,” said Fawad Razaqzada, technical analyst for Forex.com