US oil prices hit $69.56 during trading on Friday, the highest since Nov. 28, 2014. Benchmark Brent touched $74.74/barrel, its highest since Nov. 27, 2014. Anadarko photo.
Oil prices rise as global crude glut shrinks
Oil prices hit levels not seen since November 2014 on Thursday. During earlier trading, US crude neared $70/barrel and benchmark Brent closed in on $75/barrel mostly due to the reduction of the global crude glut that pressured crude prices for the past three years.
By 1:28 p.m., EDT, US WTI rose 13 cents to $68.60. Earlier in the session, WTI hit $69.56/barrel, the highest since Nov. 28, 2014. Brent crude futures were up 50 cents to $73.98/barrel after reaching a session high of $74.74/barrel, which is the highest Brent crude has been since Nov. 27. The Canadian Crude Index increased 16 cents to $50.30/barrel.
According to Reuters, traders are fuelling the increases by betting on further upside. Many anticipate supply disruptions in Venezuela and some OPEC nations as well as further drawdowns of global supplies, driven by rising demand.
On Thursday, OPEC reported a joint cartel and non-OPEC panel meeting in Jeddah, Saudi Arabia determined that the global crude glut had been mostly eliminated.
Reuters’ sources said the Joint Technical Committee (JTC) determined that March crude inventories in developed nations sat at 12 million barrels over the five-year average. This is down from 340 million barrels above the average in January 2017.
“What happened to the glut? It’s gone. We probably now have the tightest oil market versus supply we’ve had in at least 10 years,” Phil Flynn, analyst at Price Futures Group told Reuters.
In the past year, oil prices have gained 40 per cent. In a sign that Saudi Arabia will continue with the OPEC supply cut agreement, the kingdom says it would be happy to see prices reach $80/barrel and even $100/barrel.
On Wednesday, the US Energy Information Administration reported commercial crude stocks fell to near the five-year average of about 420 million barrels. As well, gasoline and distillate stocks fell and refinery usage hit levels not seen at this time of year in 13 years.
“Product demand was strong, products (inventories) were lower, crude was lower – it was really across the board supportive,” Robert Yawger, director of energy futures at Mizuho told Reuters.
Oil prices were also supported by the Trump administration’s threat to re-impose sanctions on Iran. Should the sanctions be imposed, exports from OPEC’s third-largest producer could be limited, which would result in further supply reductions.