Oil prices hit their highest level since late January on Friday after Saudi Arabia’s energy minister said the OPEC cuts need to be extended into 2019.  Anadarko photo.

Oil prices hit session high of $70.22/barrel

On Friday oil prices hit their highest mark since late January on remarks made by Saudi Arabia’s energy minister who said the OPEC supply cut agreement will have to be extended into 2019.  As well, analysts’ concerns over the future of Iran’s oil exports grew due to US President Donald Trump’s appointment of a new, hawkish, national security adviser.

After hitting a session high of $70.22/barrel, by 2:27 p.m. EDT, Brent crude settled back to $69.44/barrel, but was up $1.06 on Friday.  US WTI rose $1.22 to $65.22/barrel and on the week, WTI had shown its biggest weekly gain since September, up about 4.9 per cent.

The Canadian Crude Index climbed $1.25 to $44.27/barrel.

“There are a number of bullish things to hang the hat of the rally on this week; be it the inventory report … or the tariff news, or the heightened tensions between Saudi and Iran,” Matt Smith, director of commodity research at Clipper Data told Reuters.

According to Smith, President Trump’s decision to make John Bolton his national security adviser also boosted oil prices.  In the past, Bolton called for the sanctions against Iran, which reduced the amount of crude Iran could export, to be reinstated.

Also, oil prices rose despite a drop in global stock markets, which slumped after investors grew more concerned about a trade war between the US and China.  Most analysts say the stand-off could impact oil markets, but for now, bullish factors outweighed it.

The Baker Hughes rig count showed US drillers added four rigs in the week ending March 23.  The total number of rigs operating in the US now sits at 804, the highest since March 2015.

In Canada, the rig count dropped by 51 to 93.  The decline is mostly attributed to seasonal factors.

Earlier in the week, OPEC reported compliance by participants in its supply cut agreement hit 138 per cent in February.  On Friday, Saudi Arabia’s Energy Minister Khalid al-Falih told reporters that the production cuts would have to continue into 2019 to reduce the global glut of crude.

“Geopolitical tensions are coming to the front. But global balances are relatively tight at the moment. That’s enough to amplify relatively small factors,” Andrew Wilson, head of energy research at BRS Brokers told Reuters.

The forecast for rising crude demand has also helped support oil prices.

“We’re continuing to see signs that demand is really healthy; total U.S. demand is more than 1 million barrels a day more than it was a year ago,” Gene McGillian, manager of market research at Tradition Energy told Reuters.

“As the fundamental picture continues to tighten, that’s going to attract further length in the market,” he added.

Financial services firm Morgan Stanley forecasts an increase in seasonal demand in the coming months.

“We are only three-four weeks away from peak refinery maintenance, after which crude and product demand should accelerate … Global inventories are already at the bottom end of the five-year range,” Morgan Stanley said.

Morgan Stanley says its predicts Brent prices will hit $75/barrel in the third quarter of this year.