Oil prices rose to 62 dollars a barrel on Tuesday, close to the highest in 2015, supported by threats to Middle East supplies and a slowdown in U.S. output.
Egypt on Monday bombed Islamic State targets in Libya, where violence has reined in most oil output.
Similarly, Iraq’s oil-rich semi-autonomous Kurdistan Regional Government threatened to withhold oil exports if Baghdad failed to send its share of the budget.
“The oil price is finding additional support from renewed greater perception of the risks to supply.
“In the short term, the momentum suggests that prices will climb further,” said Carsten Fritsch, analyst at Commerzbank.
Brent crude LCOc1 rose 60 cents to 62.00 dollars a barrel by 1101 GMT (06:01 a.m. EST).. It reached a 2015 high of 62.57 dollars on Monday. U.S. crude CLc1 was 43 cents higher at 53.21 dollars a barrel.
Reports say oil prices collapsed in the second half of 2014 on oversupply.
The Organisation of the Petroleum Exporting Countries (OPEC),refused to cut its output, choosing to defend market share against U.S. shale oil and other competing sources.
Brent has jumped by almost 40 per cent in the last four weeks, supported by a sharp fall in U.S. oil drilling. It had reached 45.19 dollars on Jan. 13, the lowest in almost six years, down from 115 dollars in June.
The threat to Iraq’s northern exports from the revenue dispute arises as bad weather has cut Iraq’s southern shipments this month.
The International Energy Agency Chief Economist Fatih Birol warned the rise of Islamic State in Iraq and Syria presented a major challenge for the investment necessary to prevent an oil shortage in the next decade.
This is with risks to Middle East supply back on the market’s radar,
“The appetite for investments in the Middle East is close to zero, mainly as a result of the unpredictability of the region,” he said.
Even so, some analysts see the rally as overblown as the market remains oversupplied. Crude inventories in top consumer the United States have hit record highs for the last five weeks.
“U.S. refinery outages, through seasonal maintenance and industrial action, will weaken U.S. crude demand.
“It will exacerbate the crude stock excess in the near term,” BNP Paribas analysts Gareth Lewis-Davies and Harry Tchilinguirian said in a report.