Oil prices hit multi-month highs on Tuesday despite Iran and Libya continuing to increase production, overshadowing an OPEC agreement struck last week to freeze output levels in a bid to stem a two-year price rout.
Benchmark Brent crude oil futures traded up 30 cents at $51.19 a barrel, its highest level since June 10. when it traded as high as $52.10. US West Texas Intermediate crude was up 14 cents at $48.95 a barrel, its highest since July 5 when it hit a high of $49.35. Earlier on Tuesday, oil prices had traded lower.
“Today’s losses should come as no surprise as Libyan production is climbing higher and Iranian exports are on the rise too. Add to these that the dollar is strengthening and you have a bearish outlook,” said Tamas Varga, analyst at PVM Oil Associates in London. Iran’s crude oil and condensate sales have likely approached levels last seen at peak time in 2011 before sanctions were imposed, sources with knowledge of the matter said.
At the same time, production is also rising in Libya, which is also exempt from an output freeze. The country’s Arabian Gulf Oil Company (AGOCO) said its production had risen to 320,000 bpd, up from about 290,000 bpd late last week, helping to push the country’s production above 500,000 bpd. Oil prices also took a knock from a stronger dollar, which reached a 13-day high against a basket of major currencies after a positive US economic survey increased investors’ confidence in a rise in US interest rates by the end of the year.
Oil investors are also keenly awaiting the latest US commercial crude oil stocks data, which has surprised the market over the past four weeks with unexpected drawdowns.
“A build in inventories is expected, so investors are taking profits before the release of the EIA numbers,” said Hans van Cleef, senior energy economist at ABN Amro.
