Oil prices edged higher to touch their highest levels since May 2015, supported by Opec-led production cuts and expectations that US crude inventories have dropped for an eighth week, writes Devika Krishna Kumar and Alex Lawler.
Opec exporting countries and allies including Russia are keeping supply limits in place in 2018, a second year of restraint, to reduce a price-denting glut of oil held in inventories.
Brent crude was up 18c at $67.96 per barrel, having earlier touched $68.29, its highest since May 2015.
US West Texas Intermediate crude (WTI) rose 36c to $62.09 and also reached its highest since May 2015 at $62.56.
“We expect oil demand growth to outpace non-Opec supply growth in both 2018 and 2019,” Standard Chartered analysts said in a note.
“In our view, the back of the Brent and WTI curves are both still underpriced. We do not think that prices below $65 per barrel are sustainable into the medium term,” they added.
Opec is cutting output by even more than it promised and the restraint is reducing oil stocks globally, a trend most visible in the US, the world’s largest and most transparent oil market.
Supply reports this week from industry group the American Petroleum Institute and the US Government’s Energy Information Administration are expected to show US crude stocks fell by 4.1m barrels, an eighth week of decline.
The government report is due this morning.
Many producers, still suffering from a 2014 price collapse, are enjoying the rally, although they are wary it will spur rival supply sources. Iran said that Opec members were not keen on increased prices.
Unrest in Iran, Opec’s third-largest producer, has lent support to prices this year although output and exports have not been affected.
Economic collapse is leading to involuntary production cuts in Venezuela, another Opec member.
There is no sign yet that Opec is prepared to relax its supply restraint.
Sources have suggested that Opec would boost output only if there were significant and sustained production disruptions from Iran and Venezuela.
Some analysts have said a potential rise in US shale oil production could discourage Opec and Russia to maintain their deal to curb supply until the end of the year for fears of losing market share.