By Henning Gloystein
SINGAPORE (Reuters) – Oil prices hit over two-month highs on Monday, lifted by a tightening market and the threat of sanctions against OPEC-member Venezuela.
futures, the international benchmark for oil prices, were trading up 24 cents, or 0.5 percent, at $52.76 per barrel at 0202 GMT, the highest since May 25.
U.S. West Texas Intermediate (WTI) crude futures were up 15 cents, or 0.3 percent, at $49.86 per barrel.
The gains put both crude benchmarks on track for sixth consecutive session of gains.
Oil prices have risen around 10 percent since the last meeting of leading members by the Organization of the Petroleum Exporting Countries (OPEC) and other major producers, including Russia, when the group discussed potential measures to further tighten oil markets.
“WTI threatened to break through $50 per barrel, while Brent pushed above $52 per barrel as the fundamentals continue to suggest a more balanced crude oil market,” ANZ bank said on Monday.
“The front of end of the curve has moved into backwardation, a sign the spot physical market is tightening.”
Backwardation is a market condition in which prices for immediate delivery of a product are higher than those later on.
Brent prices for delivery in September are currently around 35 cents above those for October.
Traders said that the recent price rises were largely due to a tightening U.S. oil market.
“Strong increases in the price of oil… (were) fueled in large part by the substantial draw-downs in U.S. inventories over the past several weeks,” said William O’Loughlin, an investment analyst at Australia’s Rivkin Securities.
“A continuation of this trend could indicate the oil market is rebalancing thanks to the production cuts by OPEC and Russia,” he added.
After rising by more than 10 percent since mid-2016, U.S. oil production dipped by 0.2 percent to 9.41 million barrels per day (bpd) in the week to July 21.
U.S. crude oil inventories have fallen by almost 10 percent from their March peaks to 483.4 million barrels.
Drilling for new U.S. production is also slowing down, with just 10 rigs added in July, the fewest for any month since May 2016.
Markets were also concerned by reports that the United States is considering imposing sanctions on Venezuela’s vital oil sector in response to Sunday’s election of a constitutional super-body that Washington has denounced as a “sham” vote.
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