Nov. 10 (UPI) — Simmering tensions in the Middle East continued to support a risk premium for crude oil prices Friday, with U.S. oil starting to test the $60 per barrel range.
Crude oil prices jumped more than 3 percent in Monday trading after a crackdown on corruption in Saudi Arabia was interpreted as a grip on power by Crown Prince Mohammed bin Salman and tacit support for an OPEC-led drive to stimulate oil prices with coordinated production cuts.
Those cuts would support the value of Saudi Aramco, which on Thursday signed a handful of deals valued at more than $4 billion. More risk was added, meanwhile, when Riyadh called its citizens out of Lebanon following the abrupt resignation of Prime Minister Saad Hariri.
“The call to get out of Lebanon is being a possible signal that Saudi Arabia may be about to attack,” Phil Flynn, a senior market analyst for the PRICE Futures Group in Chicago, said in an emailed market report.
Elsewhere, global markets could be tightening because of developments in Venezuela, a member of the Organization of Petroleum Exporting Countries. The country may have failed to met its $1.1 billion in obligations to its creditors last week, and the U.S. government this week hit a dozen Venezuelans with sanctions because of allegations of ties to a fraudulent elections.
A market report emailed by RBC Capital on Friday said that geopolitical risk, improved demand and lower global oil volumes meant the bullish sentiments were firmly entrenched.
“Despite countless head fakes in the oil market over recent years, the drastically improved fundamental backdrop makes the recent rally more sustainable than the previous myriad of stutter steps,” the report read.
The price for Brent crude oil was up just 0.1 percent to $64 per barrel as of 9:20 a.m. EST. West Texas Intermediate, the U.S. benchmark for the price of oil, was flat at $57.17 per barrel.
Markets since Monday’s surge have been volatile, though gains this year have been substantial. The price for Brent crude oil is up 15 percent since the beginning of October and continues to test multi-year highs.
The market may move later in the trading day once oilfield services company Baker Hughes releases its weekly rig count, which offers a reflection of activity in exploration and production. Gains in the United States, where production is testing the OPEC-led balancing effort, could indicate future production growth and drag oil prices lower.
Flynn said demand is soaring, however, and the fundamental signs of a stronger market are becoming clear.
“Oil and product demand is soaring,” he said. “Oil products like gas and diesel are tightening and we are in a major tightening cycle.”