Oil prices rose to their highest this year on concerns over the security of Middle East Supplies after Saud Arabia and her Allies continued their airstrikes on rebels trying to topple the government in Yemen.
“The Saudi escalation of its Yemen campaign is producing exactly the kind of geopolitical tensions oil is known to rally for,” Gene McGillian, senior analyst at Tradition Energy, an oil markets advisory in Stamford, Connecticut, told Yahoo News
“You also have the assumption that U.S. production will continue to decline from cutbacks in oil rigs count and exploration expenditure, though I’m not too much of a believer in such improving fundamentals,” he said.
Also fuelling the strength was speculation that weak economic data from China would increase the possibility of a stimulus.
The rally was also stoked by expectations by traders that US output would continue its decline after two straight weeks of declines.
According to the Energy Information Administration, US stockpiles fell more than expected in the last seven week to their lowest levels in the year.
Oilfield services provider Genscape Inc also reported to its clients that inventories in Cushing, Okla. fell last week a broker intimated to the Wall Street Journal.
Light Sweet Crude for June delivery advanced $1.57 or 2.9% to $57.74 a barrel bolstered by a weaker dollar with the Euro advancing more than 1% against the greenback. This is the highest close for a front-month contract since December last year.
A weaker dollar increases demand for commodities denominated in dollars as it makes them affordable to holders of other currencies.
Brent for June delivery, the global benchmark, gained $2.12 or 3.14% to settle at $64.85 a barrel- its highest settlement in a year.
Earlier Thursday, HSBC reported that China’s manufacturing PMI for April fell to 49.2 from 49.6 in the previous month.
An index reading of 50 indicates growth.
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