Supply squeeze pushes oil price to 3½-year high

Sergiy Serdyuk  Adobe Stock

Sergiy Serdyuk Adobe Stock

"Oil prices continued to climb on Thursday as a decline in US crude inventories and commentary from Saudi Arabia that it will be happy to see crude rise to 80 dollars or even 100 dollars helped boost prices", RBC said in a note. The US Energy Information Administration released a report showing oil inventories in the US fell by 1.1 million barrels last week to about 428 million barrels.

Crude rose to its highest level since 2014 in NY as the drop in US inventories reported by an industry group helped to sustain a rally spurred by geopolitical risks.

The EIA reported USA crude stockpiles dropped 1.07 million barrels last week, while supplies at the Cushing, Oklahoma, pipeline hub dropped by 1.12 million. June Brent, the global crude benchmark, gained $1.90, or 2.7%, to $73.48 a barrel on ICE Futures Europe, which marked the highest settlement since November 26, 2014.

OPEC's Joint Ministerial Monitoring Committee will recommend to OPEC whether the deal should be extended into 2019.

As crude production in the North Sea continues to evolve, its role in an increasingly globalized market has started to shift, having an impact on Dated Brent and its position as a global oil benchmark.

Current OPEC compliance with production cut plans remains above their historical average, and it usually takes between two to three quarters for inventories to normalize after the cuts.

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OPEC and delegations from other major oil producing countries will meet in Jeddah April 20. Oil stocks in developed economies in February stood a mere 43 million barrels above the latest five-year average, down from 340 million barrels above in January 2017. June Brent crude finished the session at $73.80, up $2.22 or +3.10%.

"There was really strong demand for gasoline, summer-like demand for gasoline", he said.

Further push to the bullish momentum was engaged when it become known that Saudi Arabia, the world's most influential oil producer, is seeking to push prices even higher.

At 427.6 million barrels, USA crude oil inventories are in the lower half of the average range for this time of the year.

"US production is too responsive to high price and there is still plenty of crude oil in tanks", he said. The contract was last up $1.63, or 2.5 percent, at $68.15.

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