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Oil prices soar on Middle East tensions

1024px Anacortes Refinery 31911
Oil refinery.

Oil prices soared on Monday to their highest in about 13 months as fears of heightened tensions in the Middle East prompted fresh buying, while hopes that a U.S. stimulus and an easing of lockdowns will buoy fuel demand provided support.

Brent crude was up $1.09, or 1.8 per cent, at $63.52 a barrel at 0428 GMT, after climbing to a session high of $63.76, the highest since Jan. 22, 2020.

US West Texas Intermediate (WTI) crude futures gained $1.28, or 2.2 per cent, to $60.75 a barrel. It touched the highest since Jan. 8 last year of $60.95 earlier in the session.

Oil prices gained around 5 per cent last week.

The Saudi-led coalition fighting in Yemen said late on Sunday it intercepted and destroyed an explosive-laden drone fired by the Iran-aligned Houthi group toward the kingdom, state TV reported, raising fears of fresh Middle East tensions.

“An early spike in oil markets was triggered by the news,” said Kazuhiko Saito, chief analyst at commodities broker Fujitomi Co.

“But the rally was also driven by growing hopes that a US stimulus and easing of lockdowns will boost the economy and fuel demand,” he said. WTI may be pulled back by profit-taking as it reached a key $60 level, he added.

US President Joe Biden pushed for the first major legislative achievement of his term on Friday, turning to a bipartisan group of local officials for help on his $1.9 trillion coronavirus relief plan.

Oil prices have rallied over recent weeks also as supplies tighten, due largely to production cuts from the Organization of the Petroleum Exporting Countries (OPEC) and allied producers in the group OPEC+.

“On top of that, robust global stock markets boosted investors’ risk appetite,” said Satoru Yoshida, a commodity analyst with Rakuten Securities.

Asian shares advanced to record highs on Monday as successful coronavirus vaccine rollouts globally raise hopes of a rapid economic recovery amid new fiscal aid from Washington.

“With cheap money supply amid monetary easing worldwide, swift rollout of the vaccine and tight supply from OPEC+ and U.S. shale oil producers, crude oil prices may be headed toward $70 a barrel,” Yoshida said.

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