Oil prices opened above $60 per barrel on Tuesday (January 2) for the first time in three years.
Brent crude reached a high of $67.29 in early trading before falling to $66.50. Meanwhile, US WTI crude futures were at $60.74, their highest price since June 2015, buoyed by geopolitical tensions.
Prices eased later in the day on the restart of major pipelines in Libya and the UK.
The Forties pipeline system in the North Sea resumed operations on on December 30 after an unexpected shutdown, but analysts believe its 450,000-barrel-per-day production capabilities will be offset by declining global inventories and strong economic growth.
Production has also resumed at a Libyan pipeline damaged in what National Oil subsidiary Waha Oil has labeled a “terrorist attack.”
Rising US production also curbed oil’s price gains on Tuesday. According to Barclays (LSE:BARC), US output is on the verge of reaching 10 million barrels per day, and “warrants close monitoring.” The bank believes US production growth could push the market into a surplus in 2018.
Overall, US commercial crude inventories have fallen by about 20 percent from historic highs seen in March 2016. OPEC and Russia’s production cuts from January 2017 through 2018 have tightened the market and have boosted prices, as has demand growth from China.
Analysts have noted that unrest in Iran, OPEC’s third-largest producer, has not impacted oilfields, but the market is watching closely to see if there will be any future disruption in supply. Anti-government protests across the country have resulted in the deaths of at least 21 people, and have lasted for at least six days.
Richard Mallinson, an analyst at consultancy Energy Aspects, told the Wall Street Journal that geopolitics will be “much more in focus now that we’re in a tighter market.” Aside from Iran, analysts are observing growing geopolitical tensions in other major oil-producing countries, such as Venezuela and Saudi Arabia.
Moody’s Investors Service predicts that oil prices will remain rangebound between $40 and $60 under current conditions.
Don’t forget to follow us @INN_Resource for real-time news updates!
Securities Disclosure: I, Melissa Shaw, hold no direct investment interest in any company mentioned in this article.