On Tuesday, oil prices had their strongest open since 2014, with crude climbing to mid-2015 highs amid large anti-government rallies in Iran and ongoing supply cuts led by OPEC and Russia.
On Tuesday, it was the first time since January 2014 that the two crude oil benchmarks started the year above $60 per barrel. U.S. West Texas Intermediate (WTI) crude futures traded flat at around $60.40 by 1200 GMT after earlier in the day hitting $60.74, their highest since June 2015. Brent crude futures, the international benchmark, were also flat at around $66.80 after earlier in the day hitting a May 2015 high of $67.29 a barrel.
“Geopolitical risks are clearly back on the crude oil agenda after having been absent almost entirely since the oil market ran into a surplus in the second half of 2014,” said Bjarne Schieldrop, chief commodities analyst, also citing Kurdistan and Libya.
On Monday night, Iranian protesters attacked police stations as security officials had a hard time containing the boldest change to the leadership since unrest in 2009. Even without the unrest in in the major oil exporter Iran, market sentiment remained bullish.
“Falling inventories globally and strong economic growth offset the restart of the Forties pipeline and the resumption of production following a pipeline outage in Libya,” said Jeffrey Halley, senior market analyst at futures brokerage. The Forties pipeline system in the North Sea reinstated their full operations after its unexpected outage.
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Oil markets have been propped up this year from production cuts led by the Middle East-dominated Organization of the Petroleum Exporting Countries (OPEC) and Russia. The supply cuts began in January 2017 and are organized until the end of this year.
U.S. commercial crude oil inventories have dropped by nearly 20 percent from last March’s historic highs, to 431.9 million barrels. But, increased U.S. production, which nearing surpassing 10 million bpd, is hindering 2018’s outlook.
“We think U.S. tight oil production growth warrants close monitoring as it could spoil OPEC’s market-balancing efforts, pushing the market into surplus in 2018,” according to Barclays.