Global oil prices hit their highest for the year yesterday after a disruption in Libyan crude exports, higher selling prices for Saudi oil and a weaker dollar that tends to inflate commodity prices.
Since April’s price rally of between 20% and 25%, oil bulls have been pushing the market up on the notion that a supply glut was easing from tightening world production despite continuous build-ups in US crude stockpiles.
UK Brent, the more widely-used oil benchmark, hit a 2015 high of $68.40 a barrel, trading at $68.06 by late afternoon, for a gain of $1.61 on the day.
US crude rose $1.87 to $60.80 a barrel, having hit the year’s peak of $61.10 earlier in the session.
Still, some were not convinced the recent price gains had much staying power.
“I think the market is getting ahead of itself,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York.
“There’s plenty of producer hedging going on as well, and those production levels are not going to come down if demand projections are not met. This could simply mean we are setting ourselves up for another leg lower in prices,” Chirichella said.
Crude prices have risen 50% in just over three months after the sell-off between June and January that took prices to around $40 from highs last summer above $100 per barrel.
Hedge funds and money managers raised bets on Brent prices climbing to another record, data showed on Monday.
The civil war in Yemen has kept the oil market on edge, boosting worries about the security of oil supplies in the broader Middle East.
Protests stopped crude flows to the eastern Libyan oil port of Zueitina yesterday.
Libyan output is below 500,000 barrels per day, a third of what the country pumped before 2010.
Saudi Arabia raised official selling prices for its Arab Light grade crude to north-west Europe to reflect a price rally in rival grades in recent weeks.
Some argue the market is oversupplied, with producers of the OPEC nations pumping almost 2 million barrels per day above demand.
OPEC meets next month to discuss production policy. Analysts see little chance that it will restrain output as members battle for market share.
The dollar fell yesterday on a mixed batch of US economic data, boosting commodities denominated in the currency.
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