The fighting in Libya, cuts by OPEC and U.S. sanctions against Venezuela and Iran have caused the price of oil to surge 2%, which is the highest in five months.
Brent, the international benchmark for oil prices, rose by 1.1% (76 cents) to become $71.10 per barrel while WTI (West Texas Intermediate) gained 2.1% ($1.32) to become $64.40 per barrel. These figures are the highest they had been since November last year.
Ritterbusch and Associates’ president, Jim Ritterbusch, said today in a note:
"This bull continues to run with today's fresh five-month highs further emboldening the speculative community that has recently been gravitating back into the long side of WTI in assertive fashion."
Genscape, a market intelligence firm, released data showing that stockpiles of crude oil were down. Apparently, at Cushing in Oklahoma, which is where West Texas Intermediate crude oil is delivered, the stockpile had fallen by around 419,000 barrels since last week.
Due to the fighting in Libya which threatened to cause problems with exporting oil, investors have already been worried about the session's supply. Eastern forces in Libya have been gaining on the Libyan capital city and have paid no attention to worldwide appeals for a ceasefire. This fighting is causing great reflection in the oil market, and there is a feeling that Libyan oil might be limited, thus creating a shortage in supply.
OPEC (the Organization of the Petroleum Exporting Countries), led by Saudi Arabia and their Russian allies have said that they intended to keep back about 1.2 million barrels of oil per day from January 2019. This is so that they can prop up oil prices. So far, they have exceeded these expectations.
Chief market strategist for futures brokerage FXTM, Hussein Sayed, commented that the supply cuts from OPEC alongside American sanctions on Venezuela and Iran had been the primary cause of the rise in prices of oil this year.
Despite these price rises, however, there are many reasons why oil prices could come down again later on in 2019. Russia, for instance, is reluctant in being an ally with OPEC and on Monday, Kirill Dmitriev, the director of the Russian direct investment fund, is seeking to increase the output of oil in the meeting with OPEC that is due to take place in June.
Dmitriev believes it to be appropriate to raise Russian output of oil by at least 228,000 barrels per day, the amount that had before been cut in production, but perhaps more.
Conversely, Khalid al-Falih, Saudi Arabia’s Minister for Energy thought it a bit premature to declare that OPEC and its allies intended to extend cuts. He did say that meeting next month would be imperative. Last year saw the output of Russian oil to reach an all-time high. There was an output of 11.16 million barrels per day. The U.S., on the other hand, produced a record-breaking 12.2 million barrels per day at the end of March.