Oil rises after OPEC+ says to keep output cuts, Iran tension rises
Oil prices rose to multi-week highs today after OPEC indicated it would probably maintain production cuts that have helped support prices this year, while tension continued to escalate in the Middle East.
Brent crude was up by 90 cents, or 1.3%, at $73.11 a barrel this morning, having earlier touched $73.40, the highest since April 26.
US West Texas Intermediate crude was up 71 cents, or 1.1% higher, at $63.47 a barrel. The US benchmark had reached $63.81 earlier, the highest since May 1.
Saudi Energy Minister Khalid al-Falih said yesterday there was consensus among the Organization of the Petroleum Exporting Countries (OPEC) and allied oil producers to drive down crude inventories “gently” but he would remain responsive to the needs of a “fragile market”.
United Arab Emirates (UAE) Energy Minister Suhail al-Mazrouei earlier told reporters that producers were capable of filling any market gap and that relaxing supply cuts was not the right decision.
US President Donald Trump had threatened Tehran yesterday, tweeting that a conflict would be the “official end” of Iran, while Saudi Arabia said it was ready to respond with “all strength” and it was up to Iran to avoid war.
The rhetoric follows last week’s attacks on Saudi oil assets and the firing of a rocket on Sunday into Baghdad’s heavily fortified “Green Zone” that exploded near the US embassy.
OPEC, Russia and other non-member producers, an alliance known as OPEC+, agreed to cut output by 1.2 million barrels per day (bpd) from January 1 for six months to prevent inventories from increasing and weakening prices.
Brent touched $75.60 on April 25, while the WTI high for 2019 is $66.60, reached on April 23. As of today, Brent is up more than 35%, while WTI has gained nearly 40%.
Another bullish signal was a second week of declines in US drilling operations, with energy companies cutting oil rigs to the lowest since March 2018.
The rig count, an early indicator of future output, fell by three to 802, General Electric’s Baker Hughes energy services unit said on Friday.
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