Oil is on the right track to achieve its largest annual gain since 2016 as fears of oversupply decreased with the drop in US crude oil inventories, and high geopolitical risks led to higher oil prices.
Futures rose 1% on the New York Stock Exchange after closing at the highest level since September last Friday. As US crude supplies fell by 5.47 million barrels in the week ending December 20, for a third consecutive decline, according to data released on Friday. On Monday, Iran seized a fuel tanker in the Strait of Hormuz, while on Sunday, the United States launched air strikes on five Iranian-backed bases in Iraq and Syria, adding to fears of geopolitical risks that began to return to the image again.
Analysts believe that oil is supported by the significant decline in last week’s inventory numbers of US crude oil, and some geopolitical risk factors are rising during the weekend and this morning, in addition to the weakening of the dollar.
Oil is preparing for its best year in three years, after a breakthrough in trade talks between the United States and China and a commitment by the Organization of Petroleum Exporting Countries and its allies to deepen production cuts and raise prices. Hedge funds remain optimistic about crude, adding to the bullish bet on Brent oil to a seven-month high, despite statements from Russia that OPEC+ will discuss ending supply restrictions next year.
Mid-West Texas Intermediate for delivery in February rose 25 cents to $61.97 a barrel on the New York Mercantile Exchange, and prices were set for the largest monthly gain since January.
Brent crude for the February settlement added 51 cents, or 0.75%, to $68.67 a barrel on the London Futures Exchange in Europe. The world benchmark was trading at a price above $6.71 to WTI.
While concerns remain about the increase in production from non-OPEC countries including the United States and Brazil, some of these concerns were faced with a decrease in US crude stocks to the lowest level in two months. The drop came despite the first drop in exports since late November, according to the Energy Information Administration data on Friday. However, gasoline inventories rose for the seventh week to the highest since mid-March.
Crude oil parities and positive market sentiment have been supportive of prices in recent weeks. On the other hand, market participants discuss the growing tensions in Iraq and Libya, but on the other hand, production has not been affected by these tensions, according to what analysts see in the oil markets.