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Crude touches $80 as investors zero in on shrinking surpluses

Bloomberg logo Bloomberg 5/17/2018 Jessica Summers

Crude rallied to $80 a barrel Thursday in London for the first time since late 2014 amid signals that stockpiles of excess oil will continue shrinking around the world.

Brent, the international benchmark for oil prices, hit a session high of $80.50 a barrel, its strongest level since Nov. 24, 2014, when it topped out at $80.85. The contract eased back to $79.19 by 2:25 p.m. ET, down 9 cents.

U.S. West Texas Intermediate crude ended the day unchanged from the previous session at $71.49. WTI earlier hit a high going back to Nov. 28, 2014 at $72.30 a barrel.

The worldwide glut has been eradicated and “OPEC still hasn’t said anything about ending the deal early, which is only good for markets,” said Ashley Petersen, lead oil analyst at Stratas Advisors in New York. As for the U.S., “we’ve been having plenty of exports to kind of alleviate any sort of glut here. There seems to be just enough crude and it’s all finding a home to go to.”

Crude this month has been touching levels last seen more than three years ago as global supplies tighten amid fears over the implications of the Iran nuclear accord break-up. Money managers who are reducing bullish bets on oil are following a “dangerous” strategy, according to Goldman Sachs Group Inc. Demand will remain strong and concerns over economic growth will probably prove temporary, Goldman’s analysts said.

“Supply concerns are top of mind after the U.S. left the Iran nuclear deal,” said Norbert Ruecker, head of macro and commodity research at Julius Baer Group Ltd. in Zurich. “The geopolitical noise and escalation fears are here to stay.”

The Energy Information Administration reported on Wednesday that U.S. crude stockpiles declined for a second week, while gasoline inventories fell by the most since early March.

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