Commodities

Oil prices off 2015-highs, but set for weekly gains

Reuters SINGAPORE | Updated on January 23, 2018

Crude prices have surged about $10 a barrel over the last month amid growing tension in the Middle East.

Oil prices on Friday edged down from 2015-highs reached in the previous session, but prices remained on track for weekly gains after renewed air strikes in Yemen stoked concerns on the security of West Asian oil shipments.

Crude prices on both sides of the Atlantic have surged almost $10 a barrel this month amid rising tension in West Asia, while slowing US production growth and signs of stronger global demand have also provided support.

Brent crude for June delivery was down 30 cents at $64.55 a barrel by 0421 GMT, after settling $2.12 higher on Thursday. The benchmark touched its highest since December 10 at $65.58 on Thursday.

US crude for June delivery dropped 36 cents to $57.38 a barrel, after settling up $1.58. The front-month contract hit a 2015-high of $58.41 on Thursday and is on course for its sixth straight weekly gain.

The rise in futures prices over the last month shows a growing disconnect between oil producers and Wall Street over when slumping oil prices will recover, with the financial community betting that the oil price cycle may turn more quickly than the industry expects.

"Equity markets are already looking for the upside," said Scott Key, chief executive of IHS.

Meanwhile, producers are bracing for oil to remain at about $60 for as long as the next five years or so.

"One can hope for $75 oil but I think one has to plan for a lower price," said Stephen Chazen, CEO of Occidental Petroleum Corp. He expects oil to remain at $60.

The spike in prices on Thursday came as warplanes from a Saudi-led coalition pounded Houthi militiamen and military bases with at least 20 air strikes throughout Yemen, despite Riyadh saying earlier it was winding down its campaign.

The Bab el-Mandeb Strait on Yemen's southern coast controls access to the Red Sea, Suez Canal and the ports of western Saudi Arabia, the world's biggest crude exporter.

Saudi Arabia is producing at near record levels at above 10 million barrels per day as it seeks to retain market share and force higher-cost producers to cut supply.

Estimates by the most watched government forecasters put OPEC production at around 2 million barrels per day above demand for its oil in the first half of 2015.

International oil prices are also drawing support from a weaker dollar after underwhelming US economic news. A softer greenback makes dollar-denominated commodities such as oil cheaper for holders of other currencies.

Published on April 24, 2015

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