Oil Prices Up to Three-Year Highs
April 23 2018 - 4:13PM
Dow Jones News
By Alison Sider and Christopher Alessi
Oil prices rose to three year highs Monday as tightening
supplies and escalating geopolitical risks helped the market climb
back from earlier losses.
U.S. crude futures settled up 24 cents, or 0.35%, to $68.64 a
barrel on the New York Mercantile Exchange. Brent, the global
benchmark, rose 65 cents, or 0.88%, to $74.71 a barrel on ICE
Futures Europe.
Oil prices are at their highest since late 2014, but trading
Friday and Monday has been volatile. President Donald Trump weighed
in via Twitter Friday, blaming OPEC for "artificially high" oil
prices. On Monday, Iran's oil minister indicated that rising oil
prices could mean OPEC's efforts are no longer needed.
But investors are still bullish, as the factors that have driven
prices to three year highs, including strong demand, continued
production cuts by the Organization of the Petroleum Exporting
Countries and other major producers, as well as geopolitical risk
to supply, remained intact. Bets on rising U.S. crude prices
outnumber bets on falling prices more than 14 to 1, according to
the most recent data from the Commodity Futures Trading
Commission.
"It's a buy the dip market," said Ric Navy, senior vice
president for energy futures at R.J. O'Brien & Associates
LLC.
OPEC and its allies last week committed to keeping a tight grip
on output for the rest of this year and perhaps in 2019. The group
has been holding back crude output by 1.8 million barrels a day
since the start of last year, part of a coordinated effort to rein
in a supply glut that had weighed on prices since late 2014 and
boost prices.
Their efforts have been succeeding, and a glut of oil that has
depressed prices for years has been nearly eliminated.
At the same time, conflicts around the world seem be ratcheting
up. Saudi Arabia said Monday that it intercepted two ballistic
missiles fired at a Saudi Arabian Oil Co. facility by Yemen's
Houthi rebels.
And Mr. Trump faces a deadline next month to decide whether to
extend sanction waivers under the nuclear agreement with Iran.
Reinstating sanctions could hit Iran's oil production and further
reduce global supply from one of OPEC's largest members at a time
when Venezuela's output is also falling rapidly.
But prices fell in earlier trading Monday after Iranian oil
minister Bijan Zanganeh said there would be no need to continue
with the production cuts if oil prices continued to rise, Iran's
oil-ministry news agency, Shana, reported.
The strength of the U.S. dollar also capped oil's gains
Monday.
Dollar-denominated commodities like oil tend to have an inverse
relationship with the U.S. currency. The Wall Street Journal Dollar
Index, which measures the greenback against a basket of 16 of its
peers, was up 0.75% Monday afternoon.
Oil market observers are looking ahead to weekly U.S. petroleum
inventory data Tuesday from the American Petroleum Institute, an
industry group, and from the U.S. Energy Information Administration
on Wednesday.
Gasoline futures rose 1.33% to $2.1237 a gallon. Diesel futures
rose 0.84% to $2.1409 a gallon.
Write to Alison Sider at alison.sider@wsj.com and Christopher
Alessi at christopher.alessi@wsj.com
(END) Dow Jones Newswires
April 23, 2018 15:58 ET (19:58 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.