Oil rises on Middle East tensions & key crude producers’ reluctance to raise output
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Crude prices rallied on Monday, hitting multi-week highs amid geopolitical tensions, as Saudi Arabia and fellow oil suppliers signaled that they might keep output cuts after the OPEC+ deal expires.
Brent crude futures enjoyed a positive start to the week and rose 1.3 percent to $73.11 per barrel at 08:11am GMT, having earlier reached $73.39, the highest since April 26. Meanwhile, US crude benchmark West Texas Intermediate (WTI) was up $1.05 to $63.81 a barrel early on Monday, the highest since May 1, before sliding to $63.32 later in the day.
The Brent price has gained more than 35 percent and WTI jumped 40 percent since the beginning of the year, after OPEC and other non-member producers led by Russia, an alliance known as OPEC+, agreed on production cuts to bolster crude prices. The current agreement expires in June when the oil producers are set to meet again to decide whether to end or further extend the existing reduction of 1.2 million barrels per day.
The prices surged shortly after the signatories to the deal reported that oil producers’ compliance with agreement hit a record 168 percent in April against 138 percent a month earlier. However, the countries may eliminate over-compliance but keep the levels stipulated by the agreement, Russia’s energy minister said after the ministerial meeting on Sunday.
The de-facto leader of OPEC, Saudi Arabia, meanwhile said that the current crude prices do not mean that the market has fully recovered, and urged a further reduction of inventories.
Escalating US tensions with Iran might have also pushed prices higher, triggering fears over supply from the Middle East. Washington has been tightening sanctions against Iran, while increasing its military presence near its territorial waters. On Sunday, US President Donald Trump threatened the Islamic Republic once again on Twitter, saying that if the country “wants to fight, that will be the official end of Iran,” despite the fact that Tehran earlier shrugged off the possibility of war in the Persian Gulf.
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