(Bloomberg) — Crude surged as strife in the Mideast region that’s home to almost half the world’s oil worsened.
Futures in New York settled at their highest since December 2014, erasing earlier losses and nearing $69 a barrel, after Iranian-backed Houthis in Yemen launched unsuccessful missile attacks against Saudi Arabia, while kingdom-led forces killed a senior leader of the rebel group. The flare-up countered a slump in commodities after the U.S. softened its position on sanctions against Russian aluminum giant United Co. Rusal.
“It seems to be an escalation, but Saudi Arabia has been very good at shooting these missiles down,” said Phil Flynn, senior market analyst at Price Futures Group Inc. in Chicago. “The concern for oil really comes at what happens if it hits?”
Oil has risen more than 5 percent this month amid geopolitical tensions in the Middle East. At the same time, OPEC’s cuts have continued to erode a worldwide excess. It won’t be necessary to extend historic supply limits if oil prices keep climbing, Iranian Oil Minister Bijan Namdar Zanganeh said, according to the ministry’s Shana news service.
West Texas Intermediate crude for June delivery rose 24 cents, or 0.4 percent, to settle at $68.64 a barrel on the New York Mercantile Exchange. Earlier, futures dropped as much as 1.8 percent.
Brent crude for June delivery added 65 cents to end the session at $74.71 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $6.07 premium to June WTI, the widest since January.
The Bloomberg Dollar Index rose as much as 0.8 percent for a fifth session of gains, keeping a lid on rising crude prices.
“Aluminum led the complex down. That seemed to take crude oil and other commodities down with it,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, referring to selloff in the morning. “You’ve got a really strong dollar as well today.”
Investors are also assessing U.S. inventory levels, with supplies seen declining last week, according to a Bloomberg survey ahead of Energy Information Administration data released on Wednesday. Cushing, Oklahoma crude stockpiles dropped 150,000 barrels last week, a Bloomberg forecast shows.
–With assistance from Tsuyoshi Inajima Heesu Lee and Grant Smith
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