Oil prices enjoy strongest new year opening since 2014 as Iran protests push up crude

Crude oil starts the year above $60 per barrel as political unrest grows in Iran

Strong demand from China has helped crude oil reach over the $60 per barrel mark
Strong demand from China has helped crude oil reach over the $60 per barrel mark

Oil prices posted their strongest opening to a year since 2014 on Tuesday, with crude rising to mid-2015 highs amid large anti-government rallies in Iran and ongoing supply cuts led by OPEC and Russia.

Brent crude futures, the international benchmark, were at $67.18 (£49.56) a barrel on Tuesday morning, up 0.5 per cent, after hitting a May 2015 high of $67.29 a barrel in the earlier in the day.

It was the first time since January 2014 that the crude oil benchmark opened the year above $60 per barrel.

“Growing unrest in Iran set the table for a bullish start to 2018,” the US-based Schork Report said in a note to clients on Tuesday.

Anti-Government protesters demonstrated in Iran on Sunday in defiance of a warning by authorities of a crackdown, extending for a fourth day one of the most audacious challenges to the clerical leadership since pro-reform unrest in 2009.

Even without the unrest in Iran, which is a major oil exporter, market sentiment was bullish.

“Falling inventories globally and strong economic growth offset the restart of the Forties pipeline and the resumption of production following a pipeline outage in Libya,” said Jeffrey Halley, senior market analyst at futures brokerage Oanda in Singapore.

The 450,000 barrels per day (bpd) capacity Forties pipeline system in the North Sea returned to full operations on 30 December after an unplanned shutdown.

Oil markets have been supported by a year of production cuts led by the Middle East-dominated Organisation of the Petroleum Exporting Countries (OPEC) and Russia. The cuts started in January 2017 and are scheduled to cover all of 2018.

US commercial crude oil inventories have fallen by almost 20 per cent from their historic highs last March, to 431.9 million barrels.

Strong demand growth, especially from China, has also been supporting crude.

Only rising US production, which is on the verge of breaking through 10 million bpd, is somewhat hampering the outlook into 2018.

“We think US tight oil production growth warrants close monitoring as it could spoil OPEC’s market-balancing efforts, pushing the market into surplus in 2018,” Barclays bank said on Tuesday.

US oil production, driven largely by onshore tight shale oil fields, has risen by almost 16 per cent since mid-2016, to 9.75 million bpd at the end of last year.

Consultancy Rystad Energy said “US crude oil production capacity has reached 10 million barrels per day.”

Reuters

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