Oil price soars to highest level in years on Mideast woes

Oil began a slide from above $100 - a price that Saudi Arabia endorsed in 2012 - in mid-2014, when growing supply from rival sources such as USA shale began to swamp the market.

The data showed a decline of 1 million barrels, a 19.7% drop compared to previous year, despite the growth in oil production, which has reached 10.54 million per day (+14% y/y). USA crude gained 26 cents to $68.73.

Crude futures were already higher ahead of the release after the American Petroleum Institute reported a 1-million-barrels drop on Tuesday afternoon.

OPEC and non-OPEC oil ministers will meet in Jeddah, Saudi Arabia today to discuss their oil production cut deal.

"We feel we are at the point where further price support is unlikely unless there is an (unexpected OPEC) supply cut", said Georgi Slavov, head of research at brokerage Marex Spectron.

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Talk that Saudi Arabia has its sights on $80-$100 a barrel oil again ignited a fierce rally in commodities and resource stocks on Thursday, though the potential boost to inflation globally put some pressure on fixed-income assets. US gasoline demand surged to a record high of 9.9 MMbbl a day before the summer driving season when consumption typically peaks. Analysts including investment bank JP Morgan had predicted that oil prices could rise as high as $80 per barrel this year.

"Do not underestimate the higher price impact on demand.the outlook remains uncertain despite higher prices and a tighter market", Pouyanné said at an industry event.

While analysts forecast Brent to rally up to $80 per barrel in the run up to the United States strikes against Syrian targets, such a high is likely to remain for a "short period but not be sustained", cautioned Spencer Welch, oil markets director at IHS Markit. Opec and 10 rival producers have curbed output by a joint 1.8 million bpd since January 2017 and pledged to do so until the end of this year. The shale oil sector's resilience is thanks to technological advances and lower production costs that not only has set OPEC on its heels but could soon dethrone Russian Federation as the world's largest oil producer. USA gasoline stocks fell by 2.968 million barrels to 235.967 million barrels, while distillate stocks fell 3.107 million barrels to 125.34 million barrels.

"US production is too responsive to high price and there is still plenty of crude oil in tanks", he said.

  • Ronnie Bowen