Oil markets cling to near 3-year highs on tighter U.S. market

The world’s most expensive oil

"This year's rapid rise in oil prices, which hit $70 this week, is backed by strong demand growth and a fall in oversupply on the back of the OPEC and non-OPEC pact, not only by political tensions, Mazroui said". That's slightly below the five year average of just over 420 million barrels. On Friday, U.S. President Donald Trump is widely expected to deny a waiver on oil-related sanctions under the terms of the United Nations -led nuclear agreement, a decision that could shelve millions of barrels of Iranian oil on the European market.

"Inventories ended 2017 9.3 percent above the five-year average, a stark contrast to the 35.6 percent surplus seen at the end of 2016", Oil Futures Editor Geoffrey Craig said in a statement emailed to UPI.

Brent crude futures, used in the pricing of more than half the world's oil, rose as much as 1.2 percent to the highest since December 4, 2014. "This reduction in the size of excess stocks emerged as a catalyst for higher oil prices".

Crude oil futures slipped from 3-year highs Friday, as traders booked profits from a furious rally inspired by a weak dollar and hopes the global market will re-balance this year.

The West Texas Intermediate for February delivery increased 0.23 US dollar to settle at 63.80 dollars a barrel on the New York Mercantile Exchange, while Brent crude for March delivery added 0.06 dollar to close at 69.26 dollars a barrel on the London ICE Futures Exchange.

Analysts and traders have warned about the risk of a price correction since the start of 2018, but they say overall market conditions remain strong, mainly due to output cuts led by the Organization of the Petroleum Exporting Countries and Russian Federation. OPEC in December, however, produced about 50,000 barrels per day more than in November.


Members of the Organization of the Petroleum Exporting Countries fear current price gains could prompt US shale oil companies to flood the market.

"The ability to hold above $60 per barrel will likely be tested as refinery demand ebbs", he said.

The market was supported by OPEC-led production cuts and expectations that US crude inventories have dropped for an eighth week.

Federal U.S. estimates show total crude oil production hit 9.78 million barrels per day in the week ending December 15, a record high that Craig said was out of reach because of the recent U.S. cold snap.

Ole Hanson, the head of commodity strategy at Saxo Bank, told UPI momentum is carrying the narrative.

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