Oil prices climbed to their highest level in over a year on Monday, boosted by economic recovery hopes and new tensions in the Middle East as a Saudi-led coalition said it had intercepted an explosive-laden drone fired by Yemen’s Houthi rebels.
Brent crude (BZ=F) is currently 3.96% higher at $63.26 per barrel, while US crude is over $60 per barrel, its highest levels since January 2020.
Oil, which had a very strong start to 2021, also gained around 5% last week.
Richard Hunter, head of markets at Interactive Investor, said: "Hopes of increased demand in the coming months along with controlled supply has been positive for an oil price which has risen by 22% in the year to date, and which has seen a further small spike following some concerns around fresh tensions in the Middle East."
Prices have also been driven by a weaker dollar, commitment by major global producers to restrain the supply of crude, and rising demand across the world, particularly in Asia - China is the world’s second-largest oil user.
Earlier this month, the Organisation of Petroleum Exporting Countries and their allies (OPEC+) announced “high compliance” among member states with agreements to limit supply to force up prices.
A committee of member countries’ representatives held a virtual meeting on Wednesday, and gave no signals of a looming let-up in the cartel’s supply cuts.
An OPEC statement said countries had held down production by a total of 2.1 billion barrels since April 2020, when the market suffered an historic collapse and futures prices even briefly turned negative.
“The committee welcomed the positive performance of participating countries,” it said. “Participants pledged to achieve full conformity and make up for previous compensation short-falls, and stressed the importance of accelerating market rebalancing without delay.”
A document seen by Reuters last week also showed that OPEC expects output cuts to keep the market in deficit throughout 2021, even though the group reduced its demand forecast.
BD Swiss said in a note: “Oil prices rose as much of the US was gripped with unusually cold weather. In particular, cold weather in Texas may disrupt output from the country’s largest shale oil patch, depressing domestic supplies.”
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