Oil Prices Hit Highest Since 2014
Oil surged to the highest levels in more than three years as tensions simmered in the Middle East, signaling optimism that a glut that has crippled the market for years is ending.
U. S. crude futures jumped $ 1.31, or 2%, to $ 66.82 a barrel Wednesday on the New York Mercantile Exchange. Brent, the global benchmark, rose $1.02, or 1.4%, to $72.06 a barrel on ICE Futures Europe. Both benchmarks are at their highest levels since December 2014.
More than a year’s worth of production cuts by the Organization of the Petroleum Exporting Countries has helped set the stage for this rally, gradually whittling away at a glut that kept prices low for more than three years. Venezuela’s oil output is also in freefall as the country’s economic turmoil deepens. With the prospect of renewed sanctions against Iran, some analysts and investors say prices are poised to climb even higher.
Gary Ross, global head of oil analytics and chief energy economist at S&P Global Platts, has been predicting that Brent prices would rise to $75 to $80. He said Wednesday that a “perfect storm” of falling supplies and geopolitical saber rattling could push prices even higher.
“What’s unfolding is an extraordinarily vulnerable situation for the market—you’re at great risk of a price spike if something unexpected happens,” he said. “We have no cushion.”
After languishing for years, oil prices surged in the final months of last year.
This year, crude has been a bright spot compared with other stagnating markets. The S&P 500, the U.S. stocks benchmark, is down 1.18% after a 19% rally in 2017.
Still, gains in oil prices haven’t been that impressive— in the first quarter, U. S. benchmark prices rose about 7.5%, and the global price rose about 5%. Prices have been firmly ensconced between $60 and $70.
But the momentum shifted this week. Both benchmarks have climbed more than 7%— their best three- day period since December 2016.
Escalating conflicts in the Middle East took center stage as tensions rose toward a boiling point. After an alleged chemical-weapons attack on a rebelheld Syrian town over the weekend, President Donald Trump warned Wednesday that U. S. missiles “will be coming” to Syria. And Saudi Arabia’s air- defense forces said in state media that they intercepted a missile over the capital city of Riyadh, which helped ratchet prices even higher.
Conflicts that could interfere with oil production have taken on renewed importance in the oil market in recent months as a glut that acted as a buffer against supply shocks has dissipated.
The International Energy Agency said last month that petroleum stockpiles in the in
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