Oil rises to two-year high on U.S. stockpiles, Iran unrest

By Grant Smith on 1/3/2018

LONDON (Bloomberg) -- Oil climbed to the highest level in more than two years on estimates that U.S. crude stockpiles fell for a seventh week, while unrest continued in OPEC’s third-biggest producer.

Futures rose as much as 0.9% in New York, approaching $61/bbl. U.S. inventories probably fell by 5 MMbbl last week, according to a survey before a government report on Thursday. In Iran, about 20 people have been killed since the turmoil broke out last week, though crude and condensate exports remain unaffected, Bloomberg tanker tracking shows.

Oil has risen for two years running as the Organization of Petroleum Exporting Countries and its allies trimmed supply to reduce a global glut. Prices will probably trade between $40 and $60/bbl this year, penned in by rising U.S. shale production, declining but still ample worldwide supplies and eroding OPEC compliance, according to Moody’s Investors Service.

“The U.S. shale-OPEC tug of war will simultaneously cap upside price potential and downside risks,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd. in London.

West Texas Intermediate for February delivery was at $60.87/bbl on the New York Mercantile Exchange, up 50 cents, at 1:30 p.m. London time. Total volume traded was about 12% below the 100-day average.

Brent for March settlement rose 45 cents to $67.02/bbl on the London-based ICE Futures Europe exchange after losing 30 cents on Tuesday. The global benchmark crude traded at a premium of $6.19 to March WTI.

Unrest in Iran began Dec. 28 with a rally against the government’s handling of the economy, before turning into a wider protest against the political establishment. The OPEC nation pumped 3.82 MMbpd in November, according to data compiled by Bloomberg.

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