Economy

Crude hits three-year high as oil prices climb on tighter market

Crude hits three-year high as oil prices climb on tighter market

Oil prices edged higher on Tuesday, with USA crude touching its highest since December 2014, supported by OPEC-led production cuts and expectations that us crude inventories have dropped for an eighth week in a row.

U.S. West Texas Intermediate (WTI) crude futures were at US$63.42 a barrel, up 46 cents, at 1024 GMT.

Crude oil futures traded 0.85 per cent higher at Rs 4,037 per barrel at the futures market as speculators raised their bets, taking positive cues from global market.

At the Multi Commodity Exchange, crude oil for delivery in January rose Rs 34 or 0.85 per cent to Rs 4,037 per barrel in a business turnover of 2,234 lots. Brent touched $69.29 in late Tuesday trading, its strongest since an intra-day spike in May 2015 and, before that, in December 2014.

The continued drop in U.S. crude oil inventories comes as the United States continues to ramp up production, hitting the second highest production level of 2017 in the last week of December of 9.782 million bpd.

"The extension of the OPEC agreement ... and declining inventories are all helping to drive the price higher", said William O'Loughlin, investment analyst at Australia's Rivkin Securities.

In an effort to prop up prices, Opec together with Russian Federation and a group of other major producers last November extended an output cut deal that was due to expire in March this year to cover all of 2018.

The cuts, which have mostly targeted Europe and North America, were aimed at reducing a global supply overhang that had dogged oil markets since 2014.

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Oil prices edged higher on Tuesday, with USA crude touching its highest since December 2014.

The American Petroleum Institute (API) reported a staggeringly large draw of 11.19 million barrels of United States crude oil inventories for the week ending January 5, marking six large draws in as many weeks, according to the API data.

Supply reports this week from industry group the American Petroleum Institute and the USA government's Energy Information Administration are expected to show US crude stocks fell by 4.1 million barrels, an eighth week of decline.

If confirmed by USA government data at 10:30 a.m. EST (1530 GMT) on Wednesday, the draw will be the largest since September 2, 2016.

In Asia, the world's biggest oil consuming region, refiners are suffering from high prices and ample fuel supplies. "Attention is paid only to news that tallies with the picture of rising prices".

"We are in winter, a season in which prices go up as demand for petroleum goes up", Zangeneh said.

Unrest in Iran, OPEC's third-largest producer, has lent support to prices this year although output and exports have not been affected.


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