An oil well is seen near Denver, Colorado. Picture: Reuters
An oil well is seen near Denver, Colorado. Picture: Reuters

New York — Oil prices have hit highs not seen since 2014, with US crude edging closer to $70 a barrel, after oil cartel Opec producers told Reuters the inventory overhang has largely disappeared and as top exporter Saudi Arabia aims to push prices even higher.

Traders said speculators continue to bet on further upside, expecting potential supply disruptions and further drawdowns, driven by strong demand.

US West Texas Intermediate (WTI) crude futures were up 57c at $69.03 as of 3.25pm GMT, after earlier hitting $69.56, their highest since November 28 2014. More than 530,000 contracts changed hands on CME Group’s New York Mercantile Exchange, compared with a daily average of about 615,000 contracts.

Brent crude futures was up 96c to $74.44. The global benchmark touched $74.74 a barrel, its highest since November 27 2014 — the day Opec decided to pump as much as it could to defend market share.

Since the outset of the late 2016 agreement to reduce supply, reached by Opec and non-members, including Russia, the inventory glut has largely been eliminated, Opec sources said in Saudi Arabia on Thursday.

Opec’s joint technical committee, meeting this week in Jeddah, found that inventories in developed nations in March were at just 12-million barrels above the five-year average, according to a source familiar with the matter.

"What happened to the glut? It’s gone. We probably now have the tightest oil market against supply we’ve had in at least 10 years," said Phil Flynn, analyst at Price Futures Group in Chicago.

Prices are up 40% in the past 12 months. Reuters reported on Wednesday that Saudi Arabia would be happy for crude to reach $80 or even $100 a barrel, viewed as a sign that Riyadh will not seek changes to the supply pact.

In the US, commercial crude stocks fell close to the five-year average of about 420-million barrels. Petrol and distillate stocks also fell, and refinery usage has been at highs not seen for this time of year in 13 years, according to the US Energy Information Administration (EIA).

"Product demand was strong, products [inventories] were lower, crude was lower — it was really supportive across the board," said Robert Yawger, director of energy futures at Mizuho.

Also supporting prices is the possibility that the US might re-impose sanctions on Iran, Opec’s third-largest producer, which could result in further supply reductions from the Middle East.