SINGAPORE – Oil prices hit their highest levels since July 2015 early on Monday as markets tightened, while Saudi Arabia’s crown prince cemented his power over the weekend through an anti-corruption crackdown that included high profile arrests.
Brent futures, the international benchmark for oil prices, hit $62.44 per barrel early on Monday, their highest level since July 2015. Brent was at $62.27 per barrel at 0051 GMT, up 20 cents, or 0.3 percent from the last close and 40 percent above June’s 2017 lows.
U.S. West Texas Intermediate (WTI) crude hit $56.00 per barrel in early trading, also the highest since July 2015, and was at $55.83, up 19 cents, or 0.3 percent from the last settlement. WTI is a third above its 2017 lows.
Crown Prince Mohammed bin Salman, Saudi Arabia’s designated future king, has tightened his grip on power through an anti-corruption purge by arresting royals, ministers and investors including prominent business billionaire Alwaleed bin Talal and the head of the National Guard, Prince Miteb bin Abdullah.
“This consolidates the reforming process underway, part of which is a desire to drive the price of oil higher,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader, said that the purge.
Bin Salman’s reforms include a plan to list parts of giant state-owned oil company Saudi Aramco next year, and a higher oil prices is seen as beneficial for the market capitalization of the future listed company.
In oil fundamentals, traders said that there were ongoing signs of tightening market conditions.
U.S. energy companies cut eight oil rigs last week, to 729, in the biggest reduction since May 2016.
The decline in U.S. drilling activity comes as the Organization of the Petroleum Exporting Countries (OPEC) and a non-OPEC group lead by Russia have pledged to hold back about 1.8 million barrels per day (bpd) in oil production to tighten markets.
The pact to withhold supplies runs to March 2018, but there is growing consensus to extend the deal.
While supplies are tightening, analysts say demand remains strong.
“Synchronous global economic growth and new supply disruptions are creating the most constructive oil price environment since … 2014,” Barclays bank said.
The British bank said it was raising its average Q4 Brent price forecast by $6 per barrel to $60 per barrel.
“The surprisingly strong macro backdrop and the accelerated inventory drawdown mean that these slightly higher price levels are likely to be sustained through Q1 of next year.
Barclays said it raised its full-year 2018 forecast by $3 per barrel to $55 per barrel. (Reporting by Henning Gloystein; Editing by Richard Pullin)