Oil prices approaching $70 per barrel

Oil prices approaching $70 per barrel

Oil prices hit their highest since 2014 today due to ongoing production cuts led by OPEC as well as healthy demand, although analysts cautioned that markets may be overheating.

WTI crude futures were at $63.44 a barrel, 0.8% above their last settlement at 0752 GMT. Earlier prices rose to as much as $63.53, the highest since Dec. 9, 2014.

Brent crude futures were at $69.11 a barrel, 0.4% above their last close. Brent touched $69.29 in late Tuesday trading, the most since May 2015. Most market participants see the price high that day as an outlier and are measuring the gain as the most since Dec. 5, 2014, when prices rose to as high as $69.82, Reuters reported.

The American Petroleum Institute said yesterday that crude inventories fell by 11.2 million barrels in the week to Jan. 5, to 416.6 million barrels. This came as the US Energy Information Administration raised its 2018 world oil demand growth forecast by 100,000 barrels per day from its previous estimate.

A leading analyst of the National Energy Security Fund, a lecturer at the Financial University under the Government of the Russian Federation, Igor Yushkov, speaking to Vestnik Kavkaza, noted that the protests in Iran and a wave of frosts in the US helped oil to almost hit $70 per barrel. "On the one hand, this is a continuation of the last year trend of a constant rise in prices that fluctuate in the gradually rising corridor. Now this corridor is $65-70 per barrel. On the other hand, the current price increase is also connected with the unrest in Iran," he said.

"Another new reason is the bad weather in the US. When these factors disappear, oil will go down to the bottom of the corridor to $65-70 per barrel," the expert expects, adding that the general trend will hold prices in this corridor for the next two months, after which we can expect fluctuations in the range of $70-75 per barrel.

"The price increase will continue, but it will become slower. It's about the launch of US oil shale projects and other industries after reaching the $70 threshold. Now the demand is ahead of production, we also have reached a market rebalancing. As the OPEC deal has reached its goal, this factor will have a lesser impact on price dynamics, so the price growth will slow down. In general, by May, we can expect oil prices to rise gradually to $75 per barrel, if the trend continues and there will be no shocks," Igor Yushkov predicts.

An associate professor of the Graduate School of Corporate Management of RANEPA, Ivan Kapitonov, also noted the trend's effect on prices hikes."In general, the mood in the market is positive now. At the same time, one should expect that when the $70 per barrel level is reached, a rebound is possible - due to the absence of any significant new events, and the threshold is significant for traders. So the rebound is more than real, with a failure of $65-67 per barrel," he stressed.

According to Ivan Kapitonov, in this regard, the threshold of $75 per barrel of oil will be very difficult to achieve. "Perhaps oil will hit $70 per barrel, but for only a day. Perhaps this can happen only after extraordinary events, especially in Saudi Arabia. But then the US will increase its production, and the more expensive the oil, the greater the extraction in the US, which will exert negative pressure on prices," the expert warned.