News

By Alison Sider and  Christopher Alessi

Updated April 23, 2018 3:43 p.m. ET

 

Oil prices rose to three year highs Monday as tightening supplies and escalating geopolitical risks helped the market climb back from earlier losses.

 

U.S. crude futures settled up 24 cents, or 0.35%, to $68.64 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose 65 cents, or 0.88%, to $74.71 a barrel on ICE Futures Europe.

 

Oil prices are at their highest since late 2014, but trading Friday and Monday has been volatile. President Donald Trump weighed in via Twitter Friday, blaming OPEC for “artificially high” oil prices. On Monday, Iran’s oil minister indicated that rising oil prices could mean OPEC’s efforts are no longer needed.

 

But investors are still bullish, as the factors that have driven prices to three year highs, including strong demand, continued production cuts by the Organization of the Petroleum Exporting Countries and other major producers, as well as geopolitical risk to supply, remained intact. Bets on rising U.S. crude prices outnumber bets on falling prices more than 14 to 1, according to the most recent data from the Commodity Futures Trading Commission.

 

“It’s a buy the dip market,” said Ric Navy, senior vice president for energy futures at R.J. O’Brien & Associates LLC.

 

OPEC and its allies last week committed to keeping a tight grip on output for the rest of this year and perhaps in 2019. The group has been holding back crude output by 1.8 million barrels a day since the start of last year, part of a coordinated effort to rein in a supply glut that had weighed on prices since late 2014 and boost prices.

 

Their efforts have been succeeding, and a glut of oil that has depressed prices for years has been nearly eliminated.

 

At the same time, conflicts around the world seem be ratcheting up. Saudi Arabia said Monday that it intercepted two ballistic missiles fired at a Saudi Arabian Oil Co. facility by Yemen’s Houthi rebels.

 

And Mr. Trump faces a deadline next month to decide whether to extend sanction waivers under the nuclear agreement with Iran. Reinstating sanctions could hit Iran’s oil production and further reduce global supply from one of OPEC’s largest members at a time when Venezuela’s output is also falling rapidly.

 

But prices fell in earlier trading Monday after Iranian oil minister Bijan Zanganeh said there would be no need to continue with the production cuts if oil prices continued to rise, Iran’s oil-ministry news agency, Shana, reported.

 

The strength of the U.S. dollar also capped oil’s gains Monday.

 

Dollar-denominated commodities like oil tend to have an inverse relationship with the U.S. currency. The Wall Street Journal Dollar Index, which measures the greenback against a basket of 16 of its peers, was up 0.75% Monday afternoon.

 

 

Oil market observers are looking ahead to weekly U.S. petroleum inventory data Tuesday from the American Petroleum Institute, an industry group, and from the U.S. Energy Information Administration on Wednesday.