Oil prices hit 2016 highs yestersday, with US crude surging 5 percent to pierce the US$40 barrier, on optimism that major producers will strike an output freeze deal next month amid rising crude exports and gasoline demand in the United States.
A weaker dollar after a Federal Reserve policy decision on Wednesday that indicated two US rate hikes this year instead of four also drew oil buyers using currencies such as the euro.
Organisation of the Petroleum Exporting Countries (Opec) kingpin Saudi Arabia and non-Opec producers led by Russia will meet on April 17 in the Qatar capital Doha, aiming for the first global supply deal in 15 years.
“The remote possibility that a coordinated supply control effort comes from this meeting, assuming it even happens, has put market bears on the defensive,” said Pete Donovan, a broker with Liquidity Energy in New York.
Oil prices have surged more than 50 percent from 12-year lows since Opec floated the idea of a production freeze, boosting Brent up from around US$27 a barrel and US crude from around US$26.
Yesterday, the front-month in US crude’s West Texas Intermediate (WTI) futures settled up US$1.74, or 4.5 percent, at US$40.20, after scaling a 2016 high of US$40.36.
Brent crude’s front-month finished up US$1.21 at US$41.54, after earlier reaching the year’s peak of US$41.60.
“For now, the market is staying well supported,” said Olivier Jakob, oil analyst at Petromatrix. “It will be difficult to return to the lows of the year.”
WTI also hit a premium against Brent in intraday trading, the first time since January, as traders piled into the US crude market on bets of an uptick in domestic oil exports.
Venezuela’s state-run PDVSA bought two more cargoes of WTI this month after becoming Latin America's first importer of US oil since January after an export ban was lifted.
“We’re seeing increasing export activity in the US Gulf, with over 2-1/2 million barrels currently loaded on tankers, ready to depart, and there’s potentially more,” said Matt Smith, who tracks crude loadings for New York-headquartered Clipperdata.
US crude has also gained traction on smaller stockpile builds of late, and surging gasoline consumption.
US crude inventories last week climbed to its fifth straight week of record highs but by just 1.3 million barrels, a much smaller build than forecast, government data showed. Gasoline demand rose 6.4 percent over the past four weeks from a year ago.
- Reuters
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