Oil prices up, Brent tops $70/barrel during session

Oil prices rose in trading on Tuesday on rising demand and strengthening economy. Anadarko photo.

Oil prices rise over 1 per cent Tuesday

Oil prices rose over one per cent and Brent crude topped $70/barrel before easing slightly in trading on Tuesday as the market was buoyed by healthy economic growth prospects and the possibility of a continuation of OPEC cuts.

By 12:243 p.m. EST, Brent crude was at $69.72, up 69 cents after racing a session high earlier of $70.09/barrel.  On Jan. 15, Brent hit a three-year high of $70.37.  US WTI rose 75 cents to $64.32/barrel, closing in on its three year high reached on Jan. 16 at $64.89.

The Canadian Crude Index rose to $38.69.

According to Reuters, the International Monetary Fund revised its forecast for world economic growth to 3.9 per cent for 2018 and 2019, up 0.2 per cent from its last report in October.

“The IMF’s upward revision of its growth forecast is generating tailwind,” according to Commerzbank analysts. “This further improves the already fairly rosy demand prospects on the oil market.”

Rising demand along with supply cuts by OPEC and other oil producing countries including Russia, have helped boost prices.

Speaking with CNBC, Saudi Arabia’s Energy Minister Khalid al-Falih said he is “still anxious” about the tenuous oil market, but “we think we’re on our way”.

On Sunday, Falih said OPEC and its partners in the supply cut agreement would likely continue to cooperate on production levels.

“There is a readiness to continue cooperation beyond 2018… The mechanism hasn’t been determined yet, but there is a consensus to continue,” Falih told Reuters after a meeting of the joint ministerial committee in Oman.

In Venezuela, a steep drop in production is offsetting rising US production, which is expected to top 10 million barrels per day (b/d) in the coming months.

In 2017, Venezuela’s production fell to 2 million b/d, down significantly from the 2.5 million b/d expected.  The International Energy Agency says Venezuela’s crude production could continue to decline in 2018.

“Six months ago there was a lot of consternation about how fast (U.S.) production might grow but that’s been offset by Venezuelan volatility,” Tony Scott, managing director of analytics at BTU Analytics told Reuters.

Scott added that Saudi Arabia’s and Iran’s production are both expected to be steady in 2018, erasing concerns that an increase in supply will undermine the rally.

Meanwhile, French bank BNP Paribas says it expects a rise in global oil inventories at the end of the year.  BNP Paribas did raise its oil price forecasts by $10/barrel with WTI to average $60/barrel and Brent $65/barrel.