Home / Business / Oil near late 2014 highs on supply cuts, strong demand

Oil near late 2014 highs on supply cuts, strong demand

SINGAPORE (Reuters) – Friday's oil price held close to the three-year highs reached earlier this week as ongoing OPEC-led supply cuts and strong demand gradually eroded surplus stocks.

FILE PHOTO: An oil well is seen near Denver, Colorado February 2, 2015. REUTERS / Rick Wilking

Brent crude oil futures LCOc1

were trading at $ 73.79 a barrel at 0440 GMT, 1 cent from their last close.

U.S. West Texas Intermediate (WTI) Crude Oil Futures CLc1 2 cents at $ 68.40 a barrel.

Both Brent and WTI reached their highest levels since Thursday of November 2014, at $ 74.75 and $ 69.56 a barrel, respectively. WTI is poised for its second weekly gain, gaining 1.3% this week, while Brent is also ready to rise for a second week, adding 1.6% this week.

Oil prices have risen through a gradually worsening market.

Under the leadership of the top exporter Saudi Arabia, the Organization of Petroleum Exporting Countries (OPEC) has held back production since 2017 in order to draw global supply surplus that depressed crude oil prices between 2014 and 2016.

"Commercial stocks in the OECD are now essentially at their 5-year average, and drawdowns are likely to accelerate as refineries out of maintenance before peak seasonal demand," said US investment bank Jefferies on Friday.

"The OECD's commercial inventories could fall back to a level not seen since the collapse of the oil price, which started in the third quarter of 2014. We assume that coverage in the days with a surplus this year will be 57 Days later, a level that was last reached in 2011, "he added.

The tighter oil market invades sophisticated products.

"There are signs of tightness in the product markets, with stocks picking the biggest week of the week since October 2016 … The US led the way but was also backed by Singapore," said the US Bank Morgan Stanley.

This tightness is also a consequence of healthy oil demand.

"Global oil demand data so far in 2018 is in line with our optimistic expectations, with Q1 18 expected to see the strongest growth since the fourth quarter of 2010 at 2.55 million barrels a day," said US Bank Goldman Sachs , which was released on Thursday.

Beyond OPEC supply management, crude oil prices have also been bolstered by the expectation that the US will reintroduce sanctions on OPEC's Iran.

"The first important geopolitical issue is the phasing out of the current US waiver of key sanctions against Iran," Standard Chartered Bank said in a note this week, referring to a deadline on May 12, when US President Donald Trump will decide whether or not to impose sanctions again.

One factor that could hit prices is the rising US production C-OUT-T-EIA, which has risen by a quarter to 10.54 million barrels per day (bpd) since mid-2016, the second-largest crude oil producer behind Russia, which pumps almost 11 million barrels.

Reporting by Henning Gloystein; Editing by Richard Pullin and Christian Schmollinger

Source link