The global benchmark Brent crude oil topped $70 a barrel today despite concerns its rally is running out of steam.
Brent reached $70.05 a barrel, the highest price recorded since oil prices were crashing in December 2014, while US benchmark West Texas Intermediate rose to $64.77 a barrel, supported by a nearly 5m barrel drop in US crude stockpiles, according to weekly data from the US Energy Information Administration (EIA) published yesterday.
EIA data also showed US production fell by 290,000 barrels per day (bpd) to 9.5m bpd, likely due to a cold snap across the country. Analysts had expected output to break the 10m bpd mark.
The market has also been buoyed by production curbs led by the Organisation of Petroleum Exporting Countries (Opec) and Russia, which are set to last until the end of 2018.
Today, UAE oil minister and Opec president Suhail al-Mazrouei said he expects the market to balance this year.
"Oil prices have been undeniably bullish this week despite the lingering concerns over the current bull rally running out of steam," said Lukman Otunuga, research analyst at FXTM.
"While further upside is still on the cards amid the current market optimism, it must be kept in mind that rising production from US shale has the ability to expose oil to downside risks," he said.
After a strong start to 2018 - oil prices have rallied more than 13 per cent since early December - analysts have warned the market is overheating.
BMI research today said: "In Q1, the balance of risk to Brent lies to the downside, with prices overheating, record net length built into the futures market and fundamentals set to weaken seasonally."
However, BMI said it holds a bullish outlook for the second half of the year.
Goldman Sachs Group yesterday warned Opec does not want the oil rally to exceed $70 a barrel for fears of reigniting the US shale boom, leading to an over-supplied market.
“We’ll see more noise and rhetoric if prices trade above $70 a barrel in coming days to push this market back down," Jeff Currie, Goldman Sachs head of commodities research, said in an interview with Bloomberg television.
The comments followed those of Iran's oil minister Bijan Namdar Zanganeh, who earlier this week said Opec members do not want Brent rising above $60 a barrel for the same reason.