Oil near late-2014 highs as Saudi pushes for higher prices

Singapore: Oil prices on Thursday remained close to late 2014-highs reached in the previous session as US crude inventories declined and as top exporter Saudi Arabia pushes for prices of $80 to $100 per barrel by continuing to withhold supplies.

Brent crude oil futures LCOc1 were at $73.82 per barrel at 0325 GMT, up 34 cents, or 0.5 per cent, from their last close.

US West Texas Intermediate (WTI) crude futures CLc1 were up 28 cents, or 0.4 per cent, at $68.75 a barrel.

Brent on Wednesday marked its highest level since November, 2014 at $73.93 per barrel. WTI hit its strongest since December, 2014 at $68.91 a barrel.

Reuters reported on Wednesday that top oil exporter Saudi Arabia would be happy to see crude rise to $80 or even $100 a barrel, which was seen as a sign that Riyadh will seek no changes to an OPEC supply-cutting deal that was introduced in 2017 to boost prices.

“The Saudis and their colleagues in OPEC need higher oil for their fiscal positions and the Kingdom is on a bold – and costly – reform program. So they might continue to squeeze the lemon while they have the chance,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

Led by Saudi Arabia, the Organization of the Petroleum Exporting Countries (OPEC) and a group of other producers that includes Russia started to withhold output in 2017 to rein in oversupply that had depressed prices since 2014.

“We are rapidly transitioning from a market drowning in oil (2014-2016) to a new reality of undersupply and low storage levels,” said Richard Robinson, manager of the Ashburton Global Energy Fund.

Since the start of the voluntary restraint, crude inventories have been gradually declining from record levels toward long-term average levels.

Further supporting oil prices is an expectation that the United States will re-introduce sanctions against OPEC-member Iran, which could result in further supply reductions from the Middle East.

In the United States, the Energy Information Administration (EIA) said on Wednesday that commercial crude stocks fell by 1.1 million barrels in the week to April 13, to 427.57 million barrels, which is close to the five-year average level around 420 million barrels.

“Oil prices have the potential to rise another 15 per cent over the remainder of 2018,” Robinson said.

With crude prices on the rise, those producers not participating in voluntary restraint are ramping up output.

US crude production C-OUT-T-EIA has jumped by a quarter since mid-2016, to a record 10.54 million barrels per day (bpd).

That’s more than Saudi Arabia produces. Only Russia churns out more oil, at almost 11 million bpd.