Oil Could Return to Triple-Digit Prices

Image oil prices BLOOMBERG

US crude gained 26 cents to $68.73. The leap in the price of oil, combined with fears that sanctions on Russian Federation could hit supplies of other commodities, energised the entire sector.

Although U.S. crude production continues to rise, it's going to take a huge leap in the number of producing oil rigs to stop the momentum that is now driving prices higher.

Brent crude oil futures were up 0.87 percent at Dollars 74.08 per barrel, from their last close while US West Texas Intermediate (WTI) crude futures were up 0.74 percent, at USD 68.98 a barrel.

The price of Brent, the worldwide benchmark for light sweet crude, topped $74 per barrel, the highest since late 2014 on Thursday, as a mix of geopolitical tensions in the Middle East, and supply disruptions in Venezuela spurred its rally. Stockpiles of gasoline fell by nearly 3 MMbbl, compared with a 450,000-bbl increase expected in a Bloomberg survey.

"US production has increased by 1 million barrels per day over the last 12 months, we expect similar rate of increase over the next 12 months", said Mr Welch.

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

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The kingdom, the de facto leader of OPEC, would be happy with Brent oil at $80-$100 per barrel to help boost the valuation of its state-run oil company, Saudi Aramco, before a minority stake goes public, sources told Reuters Wednesday.

The meeting of the Joint Technical Committee (JTC) earlier on Thursday found that oil inventories in developed nations in March stood at 12 million barrels above the five-year average, one of the sources said.

Yields on US two-year Treasuries stood at levels last visited in 2008 at 2.43 percent. Saudi Arabia's comments were seen as an intent to continue limiting oil production, although oil stores are now close to the 5-year average. This would shift the initial goal of the scheme and would see it morph into an effort to drive prices up past $80, or possibly even $100, a barrel.

A rally in recent weeks has been fueled by concerns over geopolitical tension in the Middle East and potential disruptions to oil supply.

Talk that Saudi Arabia has its sights on $80 to $100 a barrel of oil again and of more United States sanctions on Russian Federation triggered wild swings in trading of commodities on Thursday, though the potential boost to inflation hit fixed-income assets. Iran, which has raised output since the 2015 nuclear deal eased sanctions against its oil industry, faces the prospect of USA president Donald Trump abandoning the deal next month.

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