Oil
rose further above $68 a barrel on Tuesday, touching its highest since May
2015, supported by OPEC-led production cuts and expectations U.S. crude
inventories fell for an eighth week.
The Organization of the Petroleum Exporting
Countries (OPEC) and allies
including Russia are keeping supply
limits in place in 2018, a second year of restraint, to reduce a price-denting
glut of oil held in inventories.
Brent
crude, the international benchmark, was up 4 cents at $67.82 a barrel at 0949
GMT and earlier touched $68.29, its highest since May 2015. U.S. crude rose 15
cents to $61.88 and also reached its highest since May 2015.
“Oil prices remain on an upward trajectory,” said Carsten Fritsch, analyst at Commerzbank.
“In view of sharply falling U.S. crude oil stocks and
record-high compliance with the production cuts by OPEC, market participants
are convinced that the market is continuing to tighten.”
OPEC
is cutting output by even more than it promised [OPEC/O] and the restraint is
reducing oil stocks globally, a trend most visible in the United States, the
world’s largest and most transparent oil market.
Supply
reports this week from industry group American Petroleum Institute and the U.S.
government’s Energy Information Administration are expected to show U.S. crude
stocks fell by 4.1 million barrels, an eighth week of decline. [EIA/S]. The API
releases its data at 2130 GMT on Tuesday and the government report is out on
Wednesday.
Many
producers, still suffering from a 2014 price collapse, are enjoying the rally,
although they are wary it will spur rival supply sources. Iran said on Tuesday
OPEC members were not keen on increased prices. Unrest in Iran, OPEC’s
third-largest producer, has lent support to prices this year although output
and exports have not been affected. Economic collapse is leading to involuntary
production cuts in Venezuela, another OPEC member.
There
is no sign yet that OPEC is prepared to relax its supply restraint. A senior
OPEC source from a major Middle Eastern oil producer said on Monday OPEC would
boost output only if there were significant and sustained production disruptions
from Iran and Venezuela. The rise in prices is expected to drive gains in U.S.
production during 2018, offsetting curbs by others.
Still,
the latest U.S. rig count, an early indicator of future output, showed a slight
dip in the amount of rigs drilling for new oil, which lent support to prices. (Reuters)
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