Published: Sat, January 13, 2018
Finance | By Loren Pratt

Oil prices rise to hit four-year high of $70 a barrel

Oil prices rise to hit four-year high of $70 a barrel

US crude oil prices closed Wednesday at their highest levels in over three years. West Texas Intermediate (WTI) crude oil prices averaged $51/b in 2017, up $7/b from the 2016 average, and ended the year $6/b higher than at the end of 2016.

"Crude oil prices continued to firm through the quarter, driven mainly by persistent demand, declining global inventories, compliance from OPEC and Russian Federation on self-imposed oil production quotas, and extended commitments to those quotas into 2018", Shawn Reynolds Portfolio Manager for VanEck, said in a note.

Just last week, as the Brent crude oil price hovered over $67 per barrel, the analysts pegged that it would touch $70 soon.

Analysts said the increase stoke hopes in the industry that the market has finally turned a corner following a three-year downturn. Economists had expected prices to rise by 0.2 percent.

On August 25, 2017, Hurricane Harvey made landfall in the U.S. Gulf Coast, disrupting refinery and port operations and resulting in a steep decrease in refinery operations.

Federal U.S. estimates show total crude oil production hit 9.78 million barrels per day in the week ending December 15, a record high that Craig said was out of reach because of the recent U.S. cold snap.

"Technically, we're at a point where it won't take very much to move Brent toward $80 plus". At the same time, production dropped by the most since October, as a cold snap disrupted operations.

There is some reason to believe that the success of the production cuts imposed past year by OPEC and its non-cartel partners - particularly Russian Federation - may open the gates for USA producers to expand their capital budgets and drill more.

In addition to the Opec and non-Opec production cuts of 1.8-million barrels per day (bpd) that are expected to last until the end of 2018, oil prices have found support from eight consecutive weeks of United States crude inventory drops.

Oil extended gains above $62 (R766.95) a barrel before United States government data forecast to show crude stockpiles declined for an eighth week and as political tensions kept on simmering in Iran, Opec's third-biggest producer.

Trading volumes were higher than average, with a flurry of trades at about 10 a.m. EST as prices jumped.

Brent crude futures were at $69.11 a barrel, 0.4 percent above their last close.

Data from RAC Fuel Watch shows that the cost of a barrel was last over $70 on 3 December 2014 when a price of $70.22 was recorded. By the way, Iran is the OPEC's third-biggest producer of crude oil.

Over the last four weeks, motor gasoline product supplied averaged about 9.1 million barrels per day, up by 2.5 percent from the same period previous year.

Oil remained on shaky ground as a bullish run-up in prices appears to have risk of deflating.

Analysts said the development is a good omen for major oil producing countries like Nigeria, but cautioned that markets may be overheating.

Import and Export Prices for December will be issued at 8.30 am ET.

Q: What will become of global crude oil supply and demand in the mid- to long-term?

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