Oil prices hit fresh highs as market tightens

Oil prices on Thursday hit their highest in more than two and a half years, touching levels not seen since before a slump in commodity markets in 2014/15, boosted by tensions in key producer Iran and by ongoing Opec-led output cuts.
A pump jack operates at a well site leased by Devon Energy Production Company near Guthrie, Oklahoma.
A pump jack operates at a well site leased by Devon Energy Production Company near Guthrie, Oklahoma. PHOTO: REUTERS

SINGAPORE (REUTERS) - Oil prices on Thursday (Jan 4) hit fresh two-and-a-half year highs and were at levels last seen at the start of the commodity slump in 2014/2015, with markets tightening amid tensions in Iran and due to ongoing Opec-led production cuts.

Prices were also buoyed by Asia's stock markets, which flirted with 10-year highs on Thursday amid strong data from leading economies including the United States, Japan and Germany.

US West Texas Intermediate (WTI) crude futures were at US$62.10 a barrel at 0445 GMT, up 47 cents, or 0.8 per cent, from their last close. They hit US$62.14 shortly before, the highest level since May 2015.

Brent crude futures - the international benchmark for oil prices - were at US$68.13 a barrel, up 29 cents, or 0.4 per cent, after hitting a May-2015 high of US$68.16 shortly before.

Beyond a brief intraday spike in May 2015, these were the highest crude price levels since December 2014, at the start of the oil price downturn.

Freezing weather in the United States has also spurred short-term demand, especially for heating oil.

"The market is clearly getting more bullish on oil as inventory levels get closer to the five-year average. Geopolitical uncertainty in Iran, Opec's third largest producer, is also helping to support the price as citizens are again protesting the government," said by William O'Loughlin, investment analyst at Australia' Rivkin Securities.

Iran's elite Revolutionary Guards have deployed forces to three provinces to put down anti-government unrest that has been ongoing for a week, their commander said on Wednesday.

In the United States, crude oil inventories fell by 5 million barrels in the week to Dec 29 to 427.8 million barrels, industry group the American Petroleum Institute said on Wednesday.

Potentially undermining the trend towards tighter market conditions is US oil production, which has risen by almost 16 per cent since mid-2016, hitting 9.75 million barrels per day (bpd) at the end of last year.

Official US Energy Information Administration (EIA) storage and production data is due on Thursday. Supplies were healthy. US oil production has risen by almost 16 per cent since the middle of 2016, hitting 9.75 million bpd at the end of last year.