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Oil surges above $80 for first time since 2014

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Benchmark oil contract North Sea Brent hit its highest level since late 2014 on Thursday, breaching $80 per barrel, with some market players predicting it could rise all the way to $100. Dubai Mercantile Exchange (DME) said Oman oil price (July Delivery 2018) reached $76.68. The price of Oman oil rose by $1.63 on Thursday from Wednesday’s price of $75.05. The average price of Oman oil (May Delivery 2018) has stabilised at $63.31, thus 30 cents per barrel higher than April Delivery 2018.


Higher oil prices, in turn, pushed the shares of energy firms in European stock markets higher, helping London’s FTSE to set a new all-time high, and the Paris CAC to establish a fresh 2018 peak.


Wall Street recovered from early weakness to show small gains in late morning in New York.


North Sea Brent crude for delivery in July jumped to $80.50 in European afternoon trading, the highest level since November 2014, posting a gain of more than 1.3 per cent from Wednesday.


By the end of the day it had pulled back to $80.33, still $1.05 up from Wednesday.


The CEO of French oil giant Total said on Thursday he “wouldn’t be surprised to see $100 per barrel” in the coming months.


“We are in a new world. We are in a world where geopolitics are dominating the market again,” Patrick Pouyanne said at an event held by a Washington think-tank.


Global oil supplies could be hit by President Donald Trump’s decision to pull the United States out of the Iran nuclear deal, and also by falling production in crisis-hit Venezuela, the International Energy Agency said on Wednesday.


“The catalyst for the latest move appears to be more concerns about the state of the supply and demand balance and Opec’s apparent unwillingness to do anything about it, even as Iran faces fresh sanctions and Venezuelan production is pressured,” said Greg McKenna, an analyst at AxiTrader.


Prior to Thursday’s oil-price rally, crude futures had already risen thanks to steady demand growth and a landmark production cut deal.


Oil’s rise could meanwhile further push up inflation, impacting growth by quickening the pace of expected increases in interest rates.


“Clearly the recent rise in oil prices is going to pose a problem for some central banks due to the temporary impact it will have on the inflation data, especially when you consider that in the past year, Brent crude prices are up more than 50 per cent,” Craig Erlam, senior market analyst at Oanda trading group, told AFP.


“The biggest test may come in countries that are already seeing target or above target inflation like the UK.”


With markets expecting inflation to pick up pace, including for other reasons such as improved wages growth, 10-year US bond yields have hit seven-year highs, adding to expectations of a series of US rate hikes this year.


On currency markets, the dollar benefited from bets on higher US rates, keeping it around multi-month highs against its major peers.


The greenback is holding at 2018 highs against the euro, also as horse-trading to form an Italian government fuels uncertainty in one of the euro zone’s biggest economies.


— Agencies


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