Tokyo: Oil rose to multi-week highs on Monday after OPEC indicated it will likely maintain production cuts that have helped support prices this year, while tensions continued to escalate in the Middle East.
Brent crude was up by 96 cents, or 1.3 per cent, at USD 73.17 a barrel by 0227 GMT, having earlier touched USD 73.40, the highest since April 26.
US West Texas Intermediate crude was 82 cents, 1.3 per cent, higher at USD 63.58 a barrel. The US benchmark reached USD 63.81 earlier, the highest since May 1.
Saudi Energy Minister Khalid al-Falih said on Sunday there was consensus among the Organization of the Petroleum Exporting Countries (OPEC) and allied oil producers to drive down crude inventories âgentlyâ but he would remain responsive to the needs of a âfragile market.â
United Arab Emirates (UAE) Energy Minister Suhail al-Mazrouei earlier told reporters that producers were capable of filling any market gap and that relaxing supply cuts was not âthe right decision.â
Meanwhile, US President Donald Trump threatened Tehran on Sunday, tweeting that a conflict would be the âofficial endâ of Iran, while Saudi Arabia said it was ready to respond with âall strengthâ and that it was up to Iran to avoid war.
The rhetoric follows last weekâs attacks on Saudi oil assets and the firing of a rocket on Sunday into Baghdadâs heavily fortified âGreen Zoneâ that exploded near the US embassy.
âAl-Falih and the UAE both put paid to suggestions of increasing production over the weekend and then President Trump essentially telling Iran to bring it on, was a perfect short-term storm for oil prices,â Greg McKenna, strategist at McKenna Macro, told Reuters by email.
OPEC, Russia and other non-member producers, an alliance known as OPEC+, agreed to reduce output by 1.2 million barrels per day (bpd) from Jan. 1 for six months to prevent inventories from increasing and weakening prices.
âThis second half, our preference is to maintain production management to keep inventories on their way declining gradually, softly but certainly declining towards normal levels,â al-Falih told a news conference after OPEC and other producers met.
Russian Energy Minister Alexander Novak earlier said an easing of cuts had been discussed and the supply situation would be clearer in a month, including from countries under sanctions.
Another bullish signal was a second week of declines in US drilling operations, with energy companies cutting oil rigs to the lowest since March 2018.
The rig count, an early indicator of future output, fell by 3 to 802, General Electric Coâs Baker Hughes energy services unit said on Friday.