Oil rose to multi-week highs on Monday after OPEC indicated it would probably maintain production cuts that have helped support prices this year, while tension continued to escalate in the Middle East.
Brent crude was up by 90 cents, or 1.3%, at $73.11 a barrel by 0604 GMT, having earlier touched $73.40, the highest since April 26.
U.S. West Texas Intermediate crude was up 71 cents, or 1.1% higher, at $63.47 a barrel. The U.S. benchmark reached $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 “gently” but he would remain responsive to the needs of a “fragile market”.
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 the right decision.
U.S. President Donald Trump threatened Tehran on Sunday, tweeting that a conflict would be the “official end” of Iran, while Saudi Arabia said it was ready to respond with “all strength” and it was up to Iran to avoid war.
The rhetoric follows last week’s attacks on Saudi oil assets and the firing of a rocket on Sunday into Baghdad’s heavily fortified “Green Zone” that exploded near the U.S. embassy.
“Al-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,” Greg McKenna, strategist at McKenna Macro, told Reuters by email.
OPEC, Russia and other non-member producers, an alliance known as OPEC+, agreed to cut output by 1.2 million barrels per day (bpd) from Jan. 1 for six months to prevent inventories from increasing and weakening prices.
“Taken together with the technical setups in both WTI and Brent, which held support in the past week or so, there is every chance we see a run toward the highs before this move is over,” McKenna said, referring to this year’s highs.
Brent touched $75.60 on April 25, while the WTI high for 2019 is $66.60, reached on April 23. As of Monday, Brent is up more than 35 percent, while WTI has gained nearly 40 percent.
Another bullish signal was a second week of declines in U.S. 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 Co’s Baker Hughes energy services unit said on Friday