Oil prices hit highest mark since spring 2015 on Iran unrest, OPEC cuts

Cold weather on US East Coast also boosts oil prices

Oil prices rose to their highest levels since May 2015 on possible supply risks due to instability in Iran as well as successful OPEC-led output cuts and higher demand as a winter “weather bomb” hits the East Coast of the United States.

By 3:43 p.m. EST, benchmark Brent had risen by 13 cents to $67.97, after hitting a high of $68.27 earlier in the session.  US WTI rose by 31 cents to $61.94/barrel, down from a session high of $62.21, the highest since May, 2015. The Canadian Crude Index fell to $39.09.

Reuters reports that apart from the May 2015 spike in oil prices, oil is trading at its highest since December 2014.

“There is enough support for prices with the cold in the U.S. and the geopolitical factor,” Petromatrix oil analyst Olivier Jakob told Reuters.

Also underpinning oil prices is data from the US Energy Information Administration reported on Wednesday which showed that US crude stocks fell by more than anticipated.  But, the EIA reported high refining activity increased stocks of distillates and gasoline.

Last week, US crude stocks fell by 7.4 million barrels, according to the EIA.

In Iran, OPEC’s third-largest producer, anti-government protests have increased investors’ concerns about supply, even though Iran’s production and exports have not been affected by these protests.

JBC Energy analysts say the price reaction to the unrest in Iran was overdone, and Julius Baer, a Swiss bank, said that oil prices projected “an overly rosy picture” that may leave the market at risk for profit-taking.

A massive winter storm bringing cold temperatures, high winds and lots of snow is hitting the East Coast of the US and Canada on Thursday.  The blizzard has spurred short-term demand for heating oil.

OPEC’s supply cut agreement has made a major impact on global crude supplies, even though US production has steadily increased and now sits at 9.78 million barrels per day, according to data from the EIA.

According to Reuters, in his annual list of surprises, Byron Wien of Blackstone, said the prospect of US crude topping $80/barrel is one of the 10 potential shockers for investors this year.