Tightening is also being supported by a better than expected demand picture: File Image/Pixabay
The recent perception that the global crude market is tightening gained traction on Thursday, aided by reports that key producer Libya is on the brink of war - and this resulted in Brent topping the $70 threshold for the first time since November.
Brent briefly touched $70.03 on Thursday before settling 9 cents higher at $69.40 per barrel, while West Texas Intermediate crude settled 36 cents lower at $62.10 per barrel.
The gains for Brent came as general Khalifa Haftar, Libya's eastern military leader, ordered his forces to march on Tripoli, which kindled concerns that open war could soon break out between the country's main political factions.
Dan Deming, managing director, KKM Financial
Demand's probably going to be very significant moving forward
Hamish Kinnear, senior analyst for the Middle East and North Africa at Verisk Maplecroft, predicted that if war breaks out, it could be long and ugly: of Hafter's Libyan National Army he said, "Our base case is that the LNA will soon find itself bogged down in heavy fighting near Tripoli; unlike its recent advance in the south, the LNA will face more determined resistance from larger and better organized militias in the western region."
Crude on Thursday was also supported by the growing notion that demand worries - which have kept a cap on prices for weeks now - may be somewhat unfounded: Michael McCarthy, chief market strategist at CMC Markets, said, "There's a much-better-than-expected demand picture after the recent China and U.S. PMI numbers, along with a potential kicker from any U.S.-China trade agreement," he said.
Larry Kudlow, economic advisor to U.S. president Donald Trump, said trade talks between the United States and China made "good headway" last week and the two sides aim to bridge differences during further talks; plus a private business survey of China's service sector showed that the Caixin/Markit services purchasing managers' index rose to 54.4, the highest since January 2018 and up from February's 51.1, a fourth-month low.
While the higher crude prices are a benefit to many countries (including the U.S., where it will presumably spur much-needed industry investment), Dan Deming, managing director of KKM Financial, told Bloomberg television that "we're reaching an area here where demand's probably going to be very significant moving forward and the increase in demand....Chinese markets are at 7 month highs and continuing to evolve....so I feel we're reaching a critical mass here" and that demand will push prices further forward.