Oil prices edge up on tighter supplies, healthy demand
Prices have been driven up by production curbs in OPEC nations and Russia, as well as by healthy demand-growth.
Brent crude futures were at $69.35 at 0124 GMT, up 20 cents, or 0.3 percent, from their last close.
Brent on Monday hit $70.37 a barrel, its highest since December, 2014, which was at the beginning of a three-year oil price slump.
U.S. West Texas Intermediate (WTI) crude futures were at $63.93 a barrel, up 20 cents, or 0.3 percent, from their last settlement. WTI hit a December-2014 peak of $64.89 a barrel on Tuesday
In an ffort to tighten markets and prop up prices, the Organization of the Petroleum Exporting Countries (OPEC) and Russia started to withhold production in January last year, and the cuts are set to last through 2018.
“Oil remains underpinned by the solid economy with strong oil demand tightening global oil inventories. The past years’ surplus supplies are slowly disappearing,” said Norbert Ruecker, head of commodity research at Swiss bank Julius Baer.
U.S. crude stocks fell by 11.2 million barrels in the week to Jan. 5 to 416.6 million barrels, industry group the American Petroleum Institute said on Tuesday.
“After years of oversupply, the inventories are contracting much faster than the markets had anticipated,” said Stephen Innes, head of trading for Asia/Pacific at futures brokerage Oanda in Singapore.
Despite this, Ruecker warned that “hedge fund expectations for further rising prices have reached excessive levels”, especially as political risk factors that have helped boost Brent, including tensions in Qatar, Kurdish regions and in Iran have so far not caused significant supply disruptions.
One major factor that in 2017 prevented crude prices from rising further was a surge in U.S. production.
Despite a drop in January due to extreme cold in North America, U.S. crude output is expected to soon break through 10 million barrels per day (bpd), challenging top producers Russia and Saudi Arabia.
However, it could take time for this expected rise in output to have a substantial impact on global supplies.