Oil prices continued to break 2015 highs today as traders bet on a tightening market.
After having their strongest start to the year since 2014, Brent crude touched $68.74 a barrel in afternoon trading, while US West Texas Intermediate (WTI) futures rose to a fresh high of $62.80 a barrel.
“In view of sharply falling US crude oil stocks and record-high compliance with the production cuts by Opec, market participants are convinced that the market is continuing to tighten," said Carsten Fritsch, analyst at Commerzbank.
Production cuts led by the Organisation of the Petroleum Exporting Countries (Opec) and Russia, which are set to last through 2018, continue to reduce the global supply glut, bringing the market back into balance.
US oil prices were also supported by a dip in the number of rigs drilling for new oil in the US from 747 to 742, according to Baker Hughes' report on Friday.
A Bloomberg survey ahead of the US Energy Information Administration's weekly report tomorrow also predicted US oil inventories fell by 3.75m barrels last week.
Malcolm Graham-Wood, analyst at Hydrocarbon Capital, added that the cold snap in the US was putting pressure on supplies.
He said rises yesterday were "somewhat led by product prices in the US which is not surprising given the bad weather out there".
"As forecast, distillate stocks are running down as US power plants are using fuel oil where they can, with demand increased as a big nuclear plant on the east coast went down. Natural Gas prices have however stayed remarkably low, supplies of gas are reasonably solid although should the cold snap last I suspect they would rise," Graham-Wood said.
At the time of writing, Brent crude prices were trading 0.12 per cent up at $67.86 a barrel while WTI traded 0.34 per cent up at $61.94 a barrel.
The dip came after Iran's oil minister Bijan Namdar Zanganeh said Opec members do not want Brent rising above $60 a barrel because of the risk that it could fuel more shale production in the US, which could lead to an excess of supply.