Eni CEO Says Politics Are Driving Oil Prices as Brent Touches $71/b

Eileen GuzmanJan 26, 2018

USA crude increased to $66.44, also the highest since December 2014, before reducing to $66.05, still up 44 cents.

The oil price has risen above $71 earlier Thursday, for the first time since 2014, as USA crude inventories fell for a tenth straight week.

A day earlier, the greenback tumbled when U.S. Treasury Secretary Steven Mnuchin said he welcomed a weaker currency.

Traders have gotten used to watching and reacting to the OPEC-led production cuts and the drawdowns in US crude oil inventory, but a new factor may have entered the equation this week.

Experts said dollar trade was behind the volatile session.

Distillate stockpiles, which include diesel and heating oil, rose by 639,000 barrels, versus expectations for a 1.5 million-barrel drop, the EIA data showed.

Rising US output threatens to undermine the supply restraint led by the Organization of the Petroleum Exporting Countries (Opec) and Russian Federation, aimed at propping up prices.

That's the lowest seasonal level since 2015 and below the US five-year average around 420 million barrels.

USA oil inventories, as measured by the Energy Information Administration at the Oklahoma hub, fell by 1.1 million barrels in the week ended January 19.

Attention is also being paid to troubling fundamentals: Gene McGillian, director of market research at Tradition Energy (who also thinks crude's most recent gains are due to nothing more than a weak dollar), warned that rising product inventories in many countries is a potentially bearish signal. Both crude benchmarks are up by nearly 60 per cent since the middle of a year ago.

Output has grown by more than 17 per cent since mid-2016 and is now on par with top exporter Saudi Arabia's. Traders expressed concerns over high supply, rising USA production and worries over future demand. According to the EIA report, USA production rose by 128,000 barrels last week to 9.878 million barrels a day, a record.

"The weakening of the U.S. dollar against a basket of global currencies. has positioned 2018 to lead off with strong levels of oil demand", said BMI Research.

But analysts are still anxious about US shale producers that are quick to increase output when oil prices rise.

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