Oil price at highest level since November 2014

Oil price hit its highest levels today since November 2014 as stockpiles fall and worries about geopolitical tensions in the Middle East weigh on the markets.

The cost of Brent crude oil futures contracts deliverable in June 2018 rose by 0.944%, to $74.18 per barrel in the course of trading on the ICE Exchange in London, according to its data.

The last time this blend’s price hit $74 per barrel was on November 27, 2014.

West Texas Intermediate is also rising, hitting a three-year high of $69.11. Yesterday, WTI hit its strongest since December, 2014 at $68.91 a barrel. 

The price of the Russian oil variety Urals increased to $71.1 per barrel.

A senior analyst of 'Uralsib Capital', Alexei Kokin, speaking to Vestnik Kavkaza, noted that there are two significant reasons fort the current increase in oil prices. "The short-term factor is good statistics from the US Energy Ministry, which showed a decline in crude and gasoline inventories and a significant increase in consumption of petroleum products and distillates in the US. In the medium term, prices have started increasing on April 9, there was a growth of $7 per barrel, which is very significant, and this was due to a certain increase in tensions in the Middle East. I mean Syria and Yemen, and, most importantly, the potential restoration of US sanctions against Iran. The markets are waiting for this to happen in May or June, as Washington gave Europe some time until May to study the possibility of joining these sanctions. That is, the main growth factor is the risk of partial return of sanctions against Iran, which can reduce the export of Iranian oil in 1-2 months," he explained.

The continuation of these factors could bring oil to $80 per barrel. "It cannot be excluded, but I think it can only happen in combination with some other news. Maybe it will be news from Venezuela, they are usually associated with another drop in production, or it will be news about new quotas for 2019 that are being discussed by OPEC or OPEC +. In recent days, Saudi Arabia has announced plans to make an IPO for its oil and gas company Saudi Aramco, and in this regard, Riyadh would like to raise oil prices so that the company is estimated at trillions of dollars in the market," Alexei Kokin suggested.

According to the deputy director of energy policy of the Institute of Energy and Finances, Alexey Belogoriev, the main factor of the current increase in oil prices is the uncertainty of the further supply-demand ratio in the market in 2018. "There is also much uncertainty in terms of the impact of financial factors on the market, since the dollar's exchange rate is very volatile, and the price of oil directly depends on it. As for supply and demand, on the one hand, the OPEC+ agreement has been very effective. On the other hand, the US output is growing rather quickly," he said.

"Against the backdrop of these uncertainties, the view on the need to buy futures to secure higher prices in the second half of the year is prevailing. At the same time, there are no objective reasons for further growth in oil prices. Moreover, even the current price is clearly overstated in relation to monumental factors, and we should rather expect it to return to $55-$65 per barrel. The risk that prices will decline in the next few months is quite real, although no one can say when and how this will happen. In addition, it is worth adding investors' fears associated with hypothetical circumstances: the  further US policy towards Iran is unclear; as well as the situation in Libya and Syria. Thus, the hypothetical background is now favorable for maintaining high prices," Alexei Belogoriev concluded.