Oil Prices at Highest amid Iran’s Unrest

Oil Prices were at their highest in more than 2-1/2 years, boosted by the unrest in Iran and ongoing OPEC-led output cuts.

US West Texas Intermediate crude futures rose 53 cents, or 0.9%, at $62.16 a barrel from their last close. They hit $62.21 shortly before, which were their highest level since May 2015.

Brent crude futures, the international benchmark for oil prices, gained 39 cents, or 0.9%, at $68.23 a barrel after revisiting a May 2015 high of $68.27 shortly before.

“The market is clearly getting more bullish on oil as inventory levels get closer to the f5-year average. Geopolitical uncertainty in Iran, OPEC’s 3rd largest producer, is also helping to support the price as citizens are again protesting the government,” said William O’Loughlin, investment analyst at Australia’ Rivkin Securities.

Demonstrations started last week in Mashhad, Iran’s 2nd largest city. They spread to several urban and provincial areas, including the capital Tehran. They left more than 20 people dead, and have reignited a geopolitical risk premium in global oil markets amid concerns about the civil unrest that could result in crude supply disruptions out of the Islamic Republic.

The reasons behind the protests varied, such as the high level of youth unemployment, the money squandered by Tehran to support President Assad’s regime in Syria, Houthi rebels in Yemen and the militia group Hezbolla, unrest among Iran’s liberal middle classes at attempts by the government to raise the cost of foreign travel, and among poorer Iranians, anger at rising food prices.

However, the protests spreading across the country pose no immediate threat to the nation’s oil exports, analysts said.

“The continued Iranian protests have triggered off a ‘what if’ reaction in an already extremely skittish oil market,” said Sukrit Vijayakar, director at energy consultancy Trifecta.

“It’s really small. It’s not even a remote threat at this point to Iranian production. The 2.3 million barrels a day that Iran exports I think are quite safe right now,” said Cliff Kupchat, chairman of risk consultancy Eurasia Group.

Meanwhile in the United States, crude oil inventories dropped by 5 million barrels in the week to December 29 to 427.8 million barrels, according to industry group the American Petroleum Institute.

Government data Thursday forecasted to show supplies were down by 4.7 million barrels, which will be a 7th weekly decrease. OPEC’s output was unchanged in December as the group approached a fresh year of curbs, a survey shows.

The Organization of the Petroleum Exporting Countries, which includes Iran, agreed in November to extend a deal to cut crude output by nearly 2% through the end of this year. The original accord was part of the strategy to rein in the global supply glut and boost prices.

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