US chill, Iran unrest help sustain oil prices at new highs

Oil rose today to its highest since May 2015, on concern about supply risks due to unrest in Iran and another decline in US inventories, and refining activity hit a 12-year high.

US oil stocks fell more than expected, continuing a steady drawdown of supplies in the world's largest oil consumer, though stocks of distillates and gasoline rose on heavy refining activity driven in part by year-end adjustments.

On Friday, oil prices held firm, with Brent crude up by more than 10 per cent from its December lows on the back of political tensions in OPEC-member Iran and a tightening US market.

US West Texas Intermediate (WTI) crude futures were at $61.95 a barrel at 0151 GMT, 5 cents below their last close but not far off the $62.21 May 2015 high reached the previous day.

Brent crude futures were at $68.03 a barrel, 4 cents below their last settlement, but not far off the $68.27 high from the day before, also the highest since May 2015.

Beyond a brief intraday spike in May 2015, these were the highest price levels since December 2014, during the oil price downturn.

Cold weather across much of the country was expected to keep demand high, as heating oil prices were just off highs not seen since early 2015.

Brent crude , the international benchmark, on Friday settled up 23 cents at $68.07 a barrel after hitting a high of $68.27 earlier in the session. US crude settled up 38 cents at $62.01, after earlier hitting $62.21, its highest since May 2015.

Freezing weather in the United States has boosted demand for heating oil. Heating oil futures were down 0.7 per cent to $2.0741 a gallon; the contract hit highs not seen since February 2014 earlier in the week.

US crude stocks fell by 7.4 million barrels in the last week of 2017, exceeding expectations, as refiners boosted activity to their highest rate since 2005, the US Energy Information Administration said on Thursday.

Anti-government protests since last week in Iran, OPEC's third-largest producer, have added a geopolitical risk premium to oil prices, though the country's production and exports have not been affected, sources said.

Apart from a spike in May 2015, oil is at its highest since December 2014 - the month after a decision by the Organization of the Petroleum Exporting Countries to stop cutting output to support prices.

OPEC, supported by Russia and other non-members, began to reduce output a year ago to remove a glut built up in the previous two years. Compliance has been high, as producers have decided to extend the supply pact until the end of 2018.

OPEC's cuts are helping reduce global inventories, even as production continues to rise in the United States. US production rose to 9.78 million barrels in the last week.

But given that Iran's oil production has not been affected by the unrest, and that US production will likely break through 10 million barrels per day (bpd) soon, a level so far only reached by Saudi Arabia and Russia, doubts are emerging whether the bull-run can last.