(Bloomberg) -- Oil briefly topped $70 a barrel in London for the first time in three years, as crude markets continued an almost unblemished run of gains for 2018.
The surge waned towards the end of the session, with the global Brent benchmark settling just 6 cents higher for a fourth day of gains. An eight-week long downward spiral in U.S. crude inventories has helped boost prices, with some analysts suggesting $80 is achievable if the Organization of the Petroleum Exporting Countries and its allies stay disciplined in limiting output.
So far this year, the crude market has risen every day but two, helping increase the S&P 500 energy index about 6 percent over that span.
“This is a pure and simple response to inventory numbers that have been pretty decent,” Bart Melek, head of global commodity strategy at TD Securities in Toronto, said by telephone. “OPEC is being exemplary citizens here, keeping supply under wraps. Demand is doing very well. Technically, we’re at a point where it won’t take very much to move Brent toward $80 plus.”
U.S. crude output declined by the most in almost three months last week as a deep freeze forced drillers to suspend operations. This led to draw-downs at the biggest American storage hub in Cushing, Oklahoma, where inventories sit at the lowest level since February 2015.
“The glut is gone. People are starting to realize that,” Phil Flynn, senior market analyst at Price Futures Group Inc. in Chicago, said by telephone. “The global economy is on fire right now. OPEC doesn’t look like they are going to be raising production anytime soon.”
Brent for March settlement ended the session at $69.26 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $5.58 to March WTI.
West Texas Intermediate for February delivery advanced 23 cents to settle at $63.80 a barrel on the New York Mercantile Exchange, the highest level since December 2014. Total volume traded was about 62 percent above the 100-day average.
“There’s been a considerable run-up,” Tamar Essner, an analyst at Nasdaq Inc. in New York, said by telephone. “It makes sense to see a bit of consolidation. We know there had been very high long positioning in the market, so it seems healthy.”
On Thursday, the S&P 500 energy index rose as much as 2.4 percent, led by gains of more than 4 percent for Anadarko Petroleum Corp., Apache Corp. and Chesapeake Energy Corp.
“The inventory overhang has largely been exhausted,” Energy Aspects Ltd.’s chief oil market analyst, Amrita Sen, said in a report. While the oil market is balancing, there is still some room for improvement, United Arab Emirates Energy Minister Suhail Al Mazrouei, also OPEC president for 2018, said at a conference in Abu Dhabi.
With assistance from Ann Koh, Ben Sharples and Grant Smith. To contact the reporter on this story: Jessica Summers in New York at email@example.com. To contact the editors responsible for this story: David Marino at firstname.lastname@example.org Reg Gale, Christine Buurma.