Oil spiked to its highest level in five months as a drop in the U.S. dollar and conflicts from Iran to Libya helped make the barrel look like an increasingly strong bet for investors.
Crude futures rallied 2.1 percent in New York Monday. The dollar fell, improving the lure of commodities priced in the greenback. Meanwhile, fighter jets bombed the Tripoli airport in Libya and U.S. President Donald Trump said he would designate Iran’s Revolutionary Guard a terrorist group, escalating tensions in two of the world’s biggest producers.
“The expectation that the tightened supply picture is going to boost prices is starting to attract length into the market," said Gene McGillian, senior analyst at Tradition Energy in Stamford, Connecticut.
The U.S. benchmark crude, meanwhile, shot past price thresholds watched closely by technical traders, who use charts to try to predict when a big move is imminent. At the same time, a suspected decline in crude supplies at Cushing, Oklahoma last week was another catalyst that helped push oil higher.
Crude prices have continued to climb after their strongest quarter in almost a decade as the Organization of Petroleum Exporting Countries and its allies curb output while economic and political crises squeeze supplies in Venezuela and Iran. Increasing tensions in Libya, which pumped 1.1 million barrels of crude a day last month, add to the risks of a supply shortfall.
WTI for May delivery rose $1.32 to settle at $64.40 a barrel on the New York Mercantile Exchange.
Brent crude for June settlement added 76 cents to end the session at $71.10 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $6.77 to WTI for the same month.
The Bloomberg Dollar Spot Index slid as much as 0.3 percent on Monday.
Oil’s gains are still being moderated by the ongoing supply boom from U.S. shale. American rigs climbed by 15 to 831 in the first increase since mid-February, according to data from oilfield services provider Baker Hughes on Friday. U.S. crude production is currently at a record high.
The structure of the futures market is also signaling tighter supplies. WTI’s front-month spread flipped to backwardation from contango on Monday, a shift that likely invited more buyers into the market. May WTI closed at a 7-cent premium to the June contract.
“That tends to be a sign, if you’re long oil, of a healthier market," said Stacey Morris, research director at Dallas-based Alerian, which tracks energy infrastructure companies. “The fact that we’re seeing it all along the curve just reflects that the near-term concern is supply."
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