Oil at highest in 2-1/2 years on Iran tensions
LONDON/NEW YORK — Oil prices rose about two percent on Wednesday to the highest in two-and-a-half years, with buying spurred by a sixth day of unrest in the Organization of Petroleum Exporting Countries (OPEC) member Iran and strong economic data from the US and Germany.
US West Texas Intermediate ( WTI) crude futures settled at $ 61.63 a barrel, up $ 1.26, or 2.10%. International benchmark Brent crude futures settled up $1.27 a barrel, or 1.90%, to $67.84 a barrel. During the session, WTI hit the highest since June 2015 while Brent touched its peak since May 2015.
After settlement, energy industry group American Petroleum Institute (API) said US oil inventories fell by 5 million barrels in the week to Dec. 29. The US Energy department was scheduled to report official oil inventory data on Thursday. API said distillate stocks rose by 4.3 million barrels, more than expected.
After the data, US heating oil futures pared gains sharply. Heating oil had settled higher on the back of the cold weather hitting a large swathe of the US. Heating oil futures settled at $2.0880 a gallon, up 1.40%. Cold weather on the East Coast has drawn a number of tankers carrying diesel and heating oil from Europe, reversing a traditional trade route.
Iran’s elite Revolutionary Guards have deployed forces to three provinces to put down anti- government unrest, their commander said on Wednesday. Six days of protests have left 21 people dead.
“While the Iran tensions are certainly a factor, the slew of remarkably strong economic data today is also forcing the rally,” said John Kilduff, partner at Again Capital LLC in New York.
Germany’s unemployment rate hit a record low in December, underpinning a broad-based economic upswing. US factory activity increased more than expected in December, a further sign of strong economic momentum.
Manufacturing and construction reports also fueled expectations for a robust US economy in 2018.
Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank, warned that “multiple but temporary supply disruptions” like the North Sea Forties and Libyan pipeline outages ( and) protests across Iran… helped create a record speculative long bet.”
With pipeline outages resolved and protests in Iran showing no signs of affecting its oil production yet, Mr. Hansen said prices could fall in early 2018, especially with rising US output.
US oil production has risen by almost 16% since the middle of 2016, hitting 9.75 million bpd at the end of last year. —