Oil Price Rises Above $68, Highest Since 2015

Saudi oil

Crude oil prices have rallied this week on the back of supply cut and ongoing Iran tension, which is having a positive impact on crude oil prices.

USA crude gained 15 cents to $61.78 and hit its highest level since May 2015.

Brent crude futures, the global benchmark for oil prices, were at $68.23 a barrel, up 0.9 percent, after revisiting a May 2015 high of $68.27 shortly before, Reuters reported.

That was 6 cents below their last close, though still near the $62.21-high reached the previous day, which was their strongest since May, 2015.

But that would nearly certainly leave stockpiles uncomfortably low, send benchmark Brent prices well above $70 per barrel and push the market into a big backwardation.

In a meeting with oil companies last Wednesday, the DOE reportedly struggled in determining which inventories it shall really be policing.

According to all these forecasts, the oil market balance will not be achieved before late in the second half of 2018, as USA shale and growing supply from other non-OPEC producers not part of the OPEC-driven pact will offset some of the cartel and allies' production cuts.

Six days of anti-government protests in Opec's third-largest producer have added a geopolitical risk premium to oil prices, although Iran's production and exports have not been affected.


At the time of writing, WTI traded at US$61.79 a barrel, while Brent crude was at US$67.87 a barrel.

Some analysts were asking yesterday whether the bull market had run its course.

Producers have made a decision to extend the deal until the end of 2018. The market will be driven by a strong demand increase of 1.3 million bpd to 99.1 million, according to IEA forecasts, which take note of the economic upswing in both developed and emerging economies. However, supply had curtailed due to production problems in Venezuela and in South Dakota in the USA, as well as pipeline issues in Libya and the Forties Oil Field in the North Sea.

Byron Wien of Blackstone listed the prospect of US crude topping $80 as one of 10 potential shockers for investors in 2018 in his annual list of surprises.

Nevertheless, despite the Opec-led output cuts, the goal of rebalancing supply and demand in the oil market remained elusive.

The spurt in oil prices is definitely not good news for India, which imports over 80% of its crude requirements.

The decline today is "more related to profit-taking after a good week", said Giovanni Staunovo, a commodity analyst at UBS Wealth Management.

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