After capping its second annual gain, oil started 2018 by advancing toward $61 as US drilling activity remained at a standstill following a slip in production and as protests continued in Iran.
US West Texas Intermediate (WTI) crude futures were at $60.62 a barrel on the New York Mercantile Exchangeat 1.36pm in Hong Kong, up 19 cents, or 0.3 per cent, after hitting $60.73 earlier in the day, the highest since June 2015. Total volume traded was about 15 per cent above the 100-day average. Prices added 58 cents to $60.42 on Friday, ending the year up more than 12 per cent.
Brent for March settlement gained 26 cents, or 0.4 per cent, to $67.13 a barrel on the London-based ICE Futures Europe exchange. Front-month prices rose about 18 per cent last year for a second annual increase. The global benchmark crude traded at a premium of $6.50 to March WTI.
It was the first time since January 2014 that the two crude oil benchmarks opened the year above $60 per barrel.
“Growing unrest in Iran set the table for a bullish start to 2018,” the US-based Schork Report said in a note to clients on Tuesday.
Anti-government protesters demonstrated in Iran on Sunday in defiance of a warning by authorities of a crackdown, extending for a fourth day one of the most audacious challenges to the clerical leadership since pro-reform unrest in 2009.
Even without the unrest in Iran, which is a major oil exporter, market sentiment was bullish.
"Falling inventories globally and strong economic growth offset the restart of the Forties pipeline and the resumption of production following a pipeline outage in Libya, " said Jeffrey Halley, senior market analyst at futures brokerage Oanda in Singapore.
The 450,000 barrels per day (bpd) capacity Forties pipeline system in the North Sea returned to full operations on December 30th after an unplanned shutdown.
Oil markets have been supported by a year of production cuts led by the Middle East-dominated Opec and Russia. The cuts started in January 2017 and are scheduled to cover all of 2018.
US commercial crude oil inventories have fallen by almost 20 per cent from their historic highs last March, to 431.9 million barrels.
Strong demand growth, especially from China, has also been supporting crude.
“We would not be surprised to see a further (oil price) rise,” said Sukrit Vijayakar, director of energy consultancy Trifecta.
Only rising US production, which is on the verge of breaking through 10 million bpd, is somewhat hampering the outlook into 2018.
US oil production has risen by almost 16 per cent since mid-2016, to 9.75 million bpd at the end of last year.
However, consultancy Rystad Energy said "US crude oil production capacity has reached 10 million barrels per day." - Reuters, Bloomberg
