With the declining United States crude oil inventories, the price of oil thursday hit $74 per barrel, its highest in nearly four years as Saudi Arabia moved to push for a price rise of $80 -$100 per barrel.
Reuters reported that Brent crude futures reached $74.74 per barrel yesterday, the highest since November 27, 2014 while U.S. West Texas Intermediate (WTI) crude futures were up 53 cents at $69.00. WTI had earlier hit $69.56, its highest since November 28, 2014.
It was exactly on November 27, 2013 that the Organisation of Petroleum Exporting Countries (OPEC) decided to pump as much as it could to defend market share, an action that sent the price of oil to a low of $27 per barrel in February 2016.
With the drop in oil price to an all-time low, OPEC and other major producers including Russia started to withhold output in 2017 to rein in oversupply that had depressed prices since 2014.
The production-cutting pact between the OPEC, Russia and other producers has given strong tailwind to oil prices.
OPEC’s main objective for the cuts is to eliminate a global surplus in oil stocks and rebalance the market.
OPEC, together with Russia and a group of other producers, last November extended an output-cutting deal to cover all of 2018.
The current deal, under which OPEC and non-OPEC producers are cutting supply by about 1.8 million barrels per day, expires in March 2018.
OPEC and its partners will meet in Jeddah, Saudi Arabia, on April 20, 2018. The cartel will then meet on June 22, 2018 to review its oil production policy.
Reuters reported on Wednesday that top oil exporter Saudi Arabia would be happy for crude to reach $80 or even $100 a barrel, which was viewed as a sign that Riyadh will not seek changes to the supply pact.
Since the start of the supply cuts, crude inventories have declined gradually from record highs towards long-term average levels.
In the U.S., the Energy Information Administration (EIA) said on Wednesday that commercial crude stocks fell close to the five-year average of about 420 million barrels.
Also supporting prices is the possibility that the U.S might re-impose sanctions on Iran, OPEC’s third-largest producer, which could result in further supply reductions from the Middle East.
But some analysts saw limits to the bull market. After falling from an all-time high of $147 per barrel in July 2008, Brent crude price had hit a peak of $115 per barrel in June 2014 before the excess inventory in the oil market forced the price down to $27 per barrel in February 2016.
WTI also reached a peak of $105 per barrel in June 2014 before the sharp drop in oil prices.