NEW YORK (Reuters) – Oil prices hit highs not seen since 2014, with U.S. crude edging closer to $70 a barrel, after OPEC producers told Reuters the inventory overhang has largely disappeared and as top exporter Saudi Arabia aims to push prices even higher.
Traders said speculators continue to bet on further upside, expecting potential supply disruptions and further drawdowns, driven by strong demand.
U.S. West Texas Intermediate (WTI) crude futures were up 57 cents at $69.03 as of 11:25 a.m. EDT, after earlier hitting $69.56, their highest since Nov. 28, 2014. More than 530,000 contracts changed hands on CME Group’s New York Mercantile Exchange, compared with an average daily of about 615,000 contracts.
Brent crude futures was up 96 cents to $74.44. The global benchmark touched $74.74 a barrel, highest since Nov. 27, 2014 – the day OPEC decided to pump as much as it could to defend market share.
Since the outset of the late 2016 agreement to reduce supply, reached by the Organization of the Petroleum Exporting Countries and non-members including Russia, the inventory glut has largely been eliminated, OPEC sources said in Saudi Arabia on Thursday.
OPEC’s Joint Technical Committee, meeting this week in Jeddah, found that inventories in developed nations in March were at just 12 million barrels above the five-year average, according to a source familiar with the matter.
“What happened to the glut? It’s gone. We probably now have the tightest oil market versus supply we’ve had in at least 10 years,” said Phil Flynn, analyst at Price Futures Group in Chicago.
Prices are up 40 percent in the last 12 months. Reuters reported on Wednesday that Saudi Arabia would be happy for crude to reach $80 or even $100 a barrel, viewed as a sign that Riyadh will not seek changes to the supply pact.
In the United States, commercial crude stocks fell close to the five-year average of about 420 million barrels. Gasoline and distillate stocks also fell, and refinery usage has been at highs not seen for this time of year in 13 years, according to the U.S. Energy Information Administration.
“Product demand was strong, products (inventories) were lower, crude was lower – it was really across the board supportive,” said Robert Yawger, director of energy futures at Mizuho.
Also supporting prices is the possibility that the United States might re-impose sanctions on Iran, OPEC’s third-largest producer, which could result in further supply reductions from the Middle East.