Brent crude rose as violence flared in Opec’s two biggest members Iraq and Saudi Arabia, raising tensions ahead of the producer group’s meeting on June 5 in Vienna.
Saudi Arabia’s King Salman vowed to punish those responsible for Friday’s suicide bombing in the world’s biggest crude-producing country. The Islamic State claimed responsibility for the bombing that killed 21 people. The fall of the Iraqi city of Ramadi, about 120km west of Baghdad, to IS fighters is one of the militants’ biggest successes since they swept across the north of the country a year ago.
Brent for July settlement rose 24c to $65.63 yesterday on the ICE Futures Europe exchange. The contract rose as much as 1.3% during the session. West Texas Intermediate oil futures gained 13c to $59.85 a barrel. The European benchmark crude traded at a premium of $5.81 to West Texas Intermediate.
Oil prices also rose as a forest fire in Alberta shut about 10% of oil sands production in Canada, the world’s fifth-biggest crude producer.
Meanwhile, oil speculators missed out as record demand from US refineries helped trim supplies from their highest level in more than eight decades and drive prices higher.
Hedge funds and other money managers reduced their net-long position in West Texas Intermediate crude by 7.1% in the seven days ended May 19, the most in two months, US Commodity Futures Trading Commission data show. Short positions anticipating lower prices expanded by 30%.
Crude snapped a five-day decline the following day after US production fell to a three-month low and inventories slipped to the least since March. Demand from refineries is the strongest for this time of year on record as they prepare for the nation’s peak driving season.
“There are increasing signs that US production has topped out,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “Refiners are using a lot of oil.”
WTI futures fell $3.49 to $57.26 a barrel on the New York Mercantile Exchange in the period covered by the CFTC report as the dollar strengthened. The contract climbed 10 cents to $59.82 in electronic trading. Prices have risen 38% from the six-year low reached March 17.
US crude-oil production dropped 1.2% in the week ended May 15 to 9.26m barrels a day, the lowest level since February 6, according to the Energy Information Administration.
The agency reduced its 2015 forecast for US oil production on May 12 as the rig count fell. Output was predicted to average 9.19m barrels a day this year, 40,000 barrels less than the previous month’s estimate.
Crude stockpiles fell by 2.67m barrels in the seven days ended May 15. Supplies have declined since reaching 490.9m barrels on April 24, the highest level since 1930.
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