Oil prices rose about 2 percent on Friday, with U.S. crude hitting its
highest in more than three years, as global supplies remained tight and the
market awaited news from Washington on possible new U.S. sanctions against
Bob Yawger, director at Mizuho, noted the looming May 12 deadline that
U.S. President Donald Trump had set for Europeans to “fix” the deal with Iran
over its nuclear programme or he would refuse to extend U.S. sanctions relief
for the oil-producing Islamic Republic.
“You have the May 12 Iran and Trump headlines that support the market,”
U.S. light crude settled up $1.29 at $69.72 a barrel. It touched a
session peak of $69.97 for the first time since November 2014. It was on track
to gain just over 2.3 percent on the week.
Brent crude oil settled up $1.25 at $74.87 a barrel. The global
benchmark was set to end the week up 0.3 percent.
Iran’s foreign minister said on Thursday that U.S. demands to change its
2015 agreement with world powers were unacceptable. Trump has said European
allies must rectify “terrible flaws” in the international accord by May 12.
European powers want to hand Trump a plan to save the Iran nuclear deal
next week. But they have also started work on protecting EU-Iranian business
ties if Trump makes good on his threat to withdraw.
Iran resumed its role as a major oil exporter in January 2016 when
international sanctions were lifted in return for curbs on Tehran’s nuclear
ANZ analysts Daniel Hynes and Soni Kumari said Brent could reach $80 a
barrel by the end of this year, attributing recent strength to rising
geopolitical risks and tighter global supply.
“We expect the market to tighten even further in second half 2018,” they
wrote in a note to clients.
Still, growing U.S. crude supplies have been capping price gains.
Surging production in the Permian shale basin is outpacing pipeline
capacity, while local refining issues have exacerbated oversupply.
The United States now produces more crude oil than top exporter Saudi
Arabia, and two weeks of U.S. inventory builds have limited the oil market’s
upside. U.S. energy companies added oil rigs for a fifth straight week, with
higher crude prices boosting profits and pushing nationwide production to
record highs. [RIG/U]
Drillers added nine oil rigs in the week to May 4, bringing the total to
834, the highest since March 2015, General Electric Co’s Baker Hughes energy
services firm said.
Hedge funds and other money managers cut their net long U.S. crude
futures and options positions in the week to May 1, the U.S. Commodity Futures
Trading Commission (CFTC) said on Friday.