By Adedapo Adesanya
Oil traded higher on Thursday as traders resumed activities following the new year celebrations amid elevated tensions in the Middle East and reports that US crude stockpiles fell further for the fourth consecutive week.
The international benchmark, Brent crude futures, rose 20 cents to or 0.3 percent to $66.20 per barrel, while the United States’ West Texas Intermediate (WTI) crude was up 6 cents or 0.1 percent at $61.12 per barrel as at 9 pm Nigerian time on Thursday.
The Middle East tension took a different turn over the weekend as the United States’ military carried out air strikes against Iran-backed Katib Hezbollah militia group and on Thursday, the country’s Defense Secretary Mark Esper said the US was prepared to deploy more troops to Iraq.
Following the airstrikes over the weekend, protesters gathered at the US Embassy in Baghdad, the capital of Iraq on Wednesday but were dispersed after the United States deployed extra troops. With this high risk to security in oil producing Iraq and Iran, prices picked up.
Prices were also supported by reports from the American Petroleum Institute (API) that US crude inventories fell 7.8 million barrels last week ahead of the weekly U.S. government data due Friday. If this correlates with the expected result, it would signify the largest drop since August.
In addition, data from the Energy Information Administration (EIA) is also expected on Friday, having been delayed by two days by the New Year’s holiday and if this also records drop, oil prices may settle higher next week ahead of the US-China trade deal signing.
The expected signing of the phase one agreement between the two world’s largest economies also supported prices on Thursday as President Donald Trump confirmed last week that both countries will sign the deal on Wednesday, January 15 in the United States’ capital, Washington D.C.
Also, with the new year, the Organisation of the Petroleum Exporting Countries alliance, OPEC+ deal to reduce oil supply begins as oil producing countries under the group begin the new policy of cutting oil production by 1.7 million barrels till March in order to curb oversupply and help push oil prices.
Banking on this, oil futures are expected to trade higher on Friday as traders will be out to check for indications that OPEC+ production cuts are actually tightening supply, and not being pressured by the rising supply from non-OPEC producers such as Norway, Guyana, and Brazil as expected last year.
