Oil surges to fresh highs on growing supply worries
LONDON (Reuters) - Oil prices rose to their highest levels since late-2014 on Monday, boosted by Venezuela’s deepening economic crisis and a looming decision on whether the United States will re-impose sanctions on Iran.
Brent crude oil futures were at $75.67 per barrel at 1126 GMT, up 80 cents from their last close. Earlier in the session they touched their highest since November 2014 at $75.89 a barrel.
U.S. West Texas Intermediate (WTI) crude futures rose 84 cents to $70.56 per barrel. Monday was the first time since November 2014 that WTI had climbed above $70 per barrel.
China’s Shanghai crude oil futures, launched in March, broke their dollar-converted record-high, rising as far as $72.54 on Monday.
The increases came despite the addition of nine U.S. oil rigs in the week to May 4, bringing the count to a three-year high of 834, according to energy services firm Baker Hughes.
Analysts said a crisis in Venezuela, a major oil exporter, underpinned prices.
“The growth in production in the U.S. is being counterbalanced by the simultaneous decline in Venezuela,” said Commerzbank analyst Carsten Fritsch.
U.S. oil firm ConocoPhillips has moved to take key Caribbean assets of Venezuela’s state-run PDVSA to enforce a $2 billion arbitration award, actions that could further impair PDVSA’s declining oil production and exports.
Venezuela’s output has halved since the early 2000s to 1.5 million barrels per day (bpd), as the South American country failed to adequately invest in its oil industry.
Widespread expectations that U.S. President Donald Trump will withdraw from the Iranian nuclear pact added further support.
Trump has a May 12 deadline to determine whether to extend sanction waivers.
“It seems that the bureaucratic wheels are turning in Washington to prepare for a sanctions snapback,” RBC Capital Markets analyst Helima Croft said in a note, adding that “the extraterritorial nature of U.S. sanctions, which cover energy, shipbuilding, finance, trade, insurance, etc., means that...Iran’s oil exports could credibly be curtailed by 200,000-300,000 bpd.”
On Monday, Saudi Arabian Energy Minister Khalid al-Falih said he is concerned about low oil industry investment and potential shortages in the future. Russian Energy Minister Alexander Novak also pledged Russia’s 100 percent compliance in May with an OPEC-led pact to reduce production.
But U.S. output has soared by more than a quarter in the last two years, to 10.62 million bpd. It will likely rise further this year as its energy firms keep drilling for more.
Additional reporting by Henning Gloystein in Singapore; editing by Alexander Smith and Jason Neely