Global oil prices touched fresh 2019 highs Monday, lifting U.S. crude past $63 for the first time since early November, as investors bet that OPEC supply cuts, sanctions on Iran and Venezuela and escalating military tensions in Libya will continue to support markets.
U.S. Secretary of State Mike Pompeo called for an end to the fighting in Libya, which has been gripped by a simmering civil war since the toppling of Muammar Gaddafi in 2011, as an army of troops, lead by the Egyptian-backed Khalifa Haftar, advanced on the capital of Tripoli following a weekend of clashes that killed 11 people and threatens to disrupt supply from the country's crucial oil industry, which produces around 1.1 million barrels each day.
"OPEC's ongoing supply cuts and US sanctions on Iran and Venezuela have been the major driver of prices throughout this year. However, the latest boost was received from an escalation of fighting in Libya which is threatening further supply disruption," said FXTM's chief market strategist Hussein Sayed. "If output from Libya is reduced significantly in the upcoming days and OPEC does not act, we may see a further 5-10% surge in prices over the next two weeks."
Brent crude contracts for June delivery, the global benchmark for oil prices, were marked 42 cents higher from their Friday close in New York and changing hands at $70.76 per barrel while WTI contracts for May delivery were seen 60 cents higher at $63.68 per barrel.
Crude was also getting a boost from OPEC's ongoing production cuts which, along with support from key allies such as Russia, are taking more than 1.2 million barrels from the market each day and are not set to expire until at least July 1.
Non-stop buying of crude #oil extended to a sixth week. In the week to April the combined net-long in Brent (+27k contracts) and WTI (+7k) reached 593k lots, the highest since October 19. #OOTT pic.twitter.com/X6p2mWyXOK— Ole S Hansen (@Ole_S_Hansen) April 7, 2019
Further upward momentum for on oil prices comes from reports that suggest waivers issued to eight countries last year, allowing them to buy sanctioned Iranian crude inside a six month window, may not be extended when the expire next month as the Trump administration looks to add further pressure on Tehran following its decision to exit a multi-lateral nuclear weapons treaty in 2018.
"The six-month waiver that the US granted to buyers of Iranian oil back in November is due to expire in early May and this has raised some questions about what will happen next," said Saxo Bank's head of commodity strategy Ole Hansen in a recent market outlook report. "But with Opec+ continuing to cut production and the US forcing down exports from Iran and Venezuela, only a major change in the outlook for demand will alter the current positive sentiment."