Oil prices surged to top $74 (£52) a barrel today, the highest price recorded since the end of 2014, on a bullish view from top exporter Saudi Arabia.
After charging ahead more than three per cent yesterday, Brent crude oil, the global benchmark, rose as high as $74.74 this afternoon. At the time of writing, it was up 1.16 per cent, or 85 cents, from its last close at $74.33 a barrel.
West Texas Intermediate futures, the US benchmark, flew past $69, climbing to a high of $69.56 a barrel before edging down somewhat.
"Brent crude just topped $74 for the first time since 2014. Despite the influence of US shale, Saudi Arabia still calls the shots on global oil markets, and it’s increasingly obvious the Saudi’s are comfortable with oil at $80 or more," said Lee Wild, head of equity strategy at Interactive Investor.
The Organisation of the Petroleum Exporting Countries (Opec) secured a landmark agreement to cut supplies along with non-Opec nations like Russia from the beginning of 2017 in order to prop up crashing oil prices. Late last year, they agreed to extend the pact to the end of 2018.
The cartel and its partners will meet in Jeddah, Saudi Arabia, tomorrow, and Opec will meet on 22 June to review the cuts. Saudi Arabia, the de facto leader, is said to be happy with oil rising to $80 or even $100 a barrel, and so no changes are expected to be made to the supply cut agreement.
Shrinking US crude inventories and geopolitical concerns have also helped boost oil prices.
The US Energy Information Administration (EIA) yesterday said crude stocks fell by 1.1m barrels to 427.57m barrels in the week to 13 April, nearing the five-year average of 420m barrels.
Hussein Sayed, chief market strategist at FXTM, said: "While the elimination of oversupply has been a critical factor pushing oil prices, I still believe there’s a significant risk premium being priced in, specifically the fear of supply disruption from the Middle East and possible renewed sanctions on Russia and Iran."
Sayed said a price of $80 to $100 per barrel could be unrealistic.
"US shale now has more incentive to boost production, especially since they can hedge at very attractive prices. Now, we can expect US output to exceed 11m barrels sooner than expected," he said.