Oil prices touched their highest level this year on Thursday, exceeding $68 a barrel as traders bet the market would tighten with US sanctions crimping supplies from Venezuela and Iran. Doubts remain, however, whether prices can rise much further given record US shale industry output.
Brent crude, the international benchmark, gained almost 2 per cent in early trading to reach $68.14, but prices later reversed to near $67 a barrel, weighed down in part by forecasts suggesting Opec would need to maintain deep output cuts this year to keep the market supported. Traders said the oil market, while showing signs of breaking higher, remained caught between two big competing forces that have dominated the industry so far in 2019. Opec, led by Saudi Arabia, has slashed production to try and support prices after they plunged towards $50 a barrel in the fourth quarter of last year, while US sanctions are removing more barrels from Iran and Venezuela.
At the same time, surging production in the US has largely capped price gains despite Opec’s efforts, with the four-year high of $86 a barrel hit last October – shortly before prices plunged – seemingly a distant memory. Concerns about the health of the global economy have also weighed, with the focus on trade talks between China and the US, the world’s top two oil consumers.