Global crude oil prices rise on Middle East tensions, healthy demand

Eileen GuzmanMar 24, 2018

For the week, Brent was up about 6.4 percent, its strongest weekly rise since July.

"Spot Brent crude oil prices averaged $3.36 per barrel more than WTI prices in 2017 compared with just $0.40 per barrel more in 2016, providing a price incentive to export USA crude oil into the global market", said Matt Stanley, a fuel broker at Freight Investor Services worldwide in a note.

U.S. West Texas Intermediate (WTI) crude futures were at $62.61 a barrel at 0744 GMT, up 55 cents, or 0.9 percent, from their previous close. "They are almost a million barrels per day higher than year-ago levels, led by Gulf Coast refining activity knocking on the door of 9 million barrels per day", said Matt Smith, director of commodity research at ClipperData in Louisville, Kentucky.

Oil prices rose by nearly 1 percent on Tuesday, lifted by a weak dollar, tensions in the Middle East and concerns of a further fall in Venezuelan output. Gold XAU=, seen as a safe haven, hit a two-week high.

FILE PHOTO: A natural gas flare on an oil well pad burns as the sun sets outside Watford City, North Dakota January 21, 2016.

Soaring U.S. output, as well as rising output in Canada and Brazil, is undermining efforts led by the Organization of the Petroleum Exporting Countries (OPEC) and Russian Federation to curb supplies and bolster prices. Saudi Energy Minister Khalid al-Falih told Reuters the curbs, instituted in January 2017, would need to continue into 2019 to reduce global inventories.

The overall bullish mood is being somewhat tempered by USA crude production, which climbed to a fresh record of 10.4 million bpd last week, putting the United States ahead of top exporter Saudi Arabia and within reach of Russia's 11 million bpd.

Brent crude futures were at $67.56 per barrel, up 14 cents, or 0.2 per cent.

"Geopolitical tensions are coming to the front. That's enough to amplify relatively small factors", said Andrew Wilson, head of energy research at BRS Brokers.

The demand outlook also supported oil.

"We are only three-four weeks away from peak refinery maintenance, after which crude and product demand should accelerate".

In a sign of healthy demand, United States crude stocks fell by 2.7 million barrels in the week ended March 16 to 425.3 million, the American Petroleum Institute said on Tuesday. That means inventories in the USA, which is taking less OPEC-produced oil than ever before, are below the five-year average for the first time since 2014.

Goldman Sachs said in a note this week that demand and OPEC cuts pushed its Brent spot price expectations to $82.50 a barrel by mid-year.

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