Oil keeps rising as Saudis back higher prices

Brent tops $74 as Riyadh seen seeking price of $80-$100 per barrel

Oil prices rose yesterday to their highest in over three years as US crude inventories declined and as top exporter Saudi Arabia pushes for higher prices by continuing to withhold supplies.

Brent crude oil futures rallied as high as $74.02 a barrel, the strongest since November 27, 2014, and were at $73.87 per barrel at 0645 GMT, up 39 cents, or 0.5 per cent, from their last close.

US West Texas Intermediate (WTI) crude futures added 28 cents, or 0.4 per cent, to $68.75 a barrel. WTI had earlier scaled to $68.95, its best level since December 2, 2014.

“The rally is due to the stock data last night and risk premiums from geopolitical tensions in the Middle East over the last few weeks, but these risk premiums are quite short-lived and investors will likely be normalising prices lower again as the tensions ease,” said OCBC analyst Barnabas Gan.

“I think oil prices are a little elevated in the short-term and we would need to have clear signs for improvement in fundamentals,” Gan said, adding the market will be looking for cues from a meeting of oil producers today.

The Organisation of Petroleum Exporting Countries (Opec) and its partners in a supply reduction pact will meet in Jeddah on April 20. Opec will then meet on June 22 to review its oil production policy.

Opec and other major producers including Russia started to withhold output in 2017 to rein in oversupply that had depressed prices since 2014.

Reuters reported on Wednesday that Saudi Arabia would be happy to see crude rise to $80 or even $100 a barrel, which was seen as a sign that Riyadh will seek no changes to the supply-cutting deal.

“The Saudis and their colleagues in Opec need higher oil for their fiscal positions and the kingdom is on a reform programme. So they might continue to squeeze while they have the chance,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

Since the start of the supply cuts, crude inventories have gradually fallen from record levels towards long-term average levels.

In the US, the Energy Information Administration (EIA) said on Wednesday that commercial crude stocks fell by 1.1 million barrels in the week to April 13, to 427.57 million barrels, close to the five-year average level of around 420 million barrels.