Oil prices climb on falling inventories

Oil prices climb on falling inventories

U.S. West Texas Intermediate and worldwide benchmark Brent crude oil rose to their highest levels since early 2015 on Thursday, on concern that the escalation of unrest in Iran will eventually have an effect on supply and another decline in U.S. inventories as refining activity hit a 12-year high.

WTI light sweet crude oil was up 15 cents at USD61.80 a barrel, the highest since 2014.

The Indonesian Crude Price (ICP) recorded the highest value in December 2017 owing to the impact of the Organization of the Petroleum Exporting Countries (OPEC) policy, the Energy and Mineral Resources Ministry (ESDM) stated. This policy then led to a rise in global oil prices that also affected the ICP. Domestic demand was also higher: USA product supplied for crude oil and petroleum products was at the highest level since 2007.

Analysts at TAC Energy said oil's move lower "looks like a natural correction of the ongoing bull market".

Oil markets have been supported by a year of production cuts led by the Middle East-dominated Organization of the Petroleum Exporting Countries and Russian Federation. On Tuesday, crude futures reached $67.29, the May 2015 high. This means U.S. supply is now close to parity with top producers, Russian Federation and Saudi Arabia, and, according to the IEA earlier in the year, will likely create a supply surplus in the first half of 2018.

While part of that resurgent growth has undoubtedly been down to lower prices the pick-up in the global economy is also a major factor, with most forecasters believing the world is now enjoying the strongest period of expansion since the financial crisis.

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Oil broke above $62 in NY as the US supply picture appeared tighter, with crude inventories at Cushing, Oklahoma sliding below their five-year average.

"At current crude oil prices it is only a matter of time before the 10 million barrel/day production target will be reached", Hansen noted, adding that the drop in USA inventories-by more than 100 million barrels from the March 2017 record peak-has also supported oil prices.

It said the OPEC agreement to curtail crude oil production in 2017 and subsequent extension of that agreement through 2018 tightened crude oil supplies, which put upward pressure on crude oil prices.

Nevertheless, despite the Opec-led output cuts, the goal of rebalancing supply and demand in the oil market remained elusive.

The decline today is "more related to profit-taking after a good week", said Giovanni Staunovo, a commodity analyst at UBS Wealth Management.

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