London: Oil hit an 18-month high on Thursday, breaking up above previous trading ranges and drawing in fresh inflows from investors at the start of the new quarter.
The move higher came despite a stronger dollar, which often dampens enthusiasm for commodities, and after news of yet another build in US crude oil inventories.
Data showing US jobless claims fell helped fuel the bullish momentum as fund buying of commodities was supported by optimism over the economic outlook.
Renewed strength: Traders in the crude oil options pit at the New York Mercantile Exchange. The rise in oil prices came despite a stronger dollar, which often dampens enthusiasm for commodities. Daniel Acker/Bloomberg
US crude for May delivery rose $1.24 per barrel to a high of $85.00 before slipping back to around $84.80 by 1325 GMT. It settled at $83.76 per barrel on Wednesday, its highest close since October 2008.
London ICE Brent climbed $1.34 to a high of $84.04 before easing a little to trade around $83.80.
Crude oil futures will not trade on Friday in either New York or London because of the Easter holiday.
“Upward momentum is very strong,” said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt. “The market is rising even with a stronger dollar and even after what were bearish figures on US inventory levels.”
“Money is flowing into commodities at the beginning of the new quarter from all sorts of investors, including funds.”
Oil prices dipped briefly on Wednesday after government data showed US crude inventories rose by 2.9 million barrels to 354.2 million barrels last week, their ninth straight gain.
Petrol stockpiles logged a modest but unexpected gain.
But the market soon returned to strength.
“We suspect that with the dollar no longer rallying, (at least for now), commodity markets have been able to build a head of steam. In addition, simmering geopolitical tensions could also be at work,” said Edward Meir at brokers MF Global.
He said talk of a possible new round of sanctions against Iran, maybe within weeks rather than months, could be underpinning the market. But he added a note of caution: “With respect to short-term pricing trends, we suspect there might be a temporary pause in the rally,” Meir said. “Although the market will likely take this level out given the way it has been trading of late, we still would caution against joining this latest advance, tempting as it might be.”
US front-month crude oil rose 5.5% in the first quarter, its fifth consecutive gain. But although it has more than doubled from a December 2008 low, it is still well short of a record high near $150 per barrel hit earlier that year.
After wild swings in the past two years, oil has stabilized recently near the range favoured by members of the Organization of the Petroleum Exporting Countries between $70 and $80.
Last quarter, oil traded from a peak of $83.95 in January to as low as $69.50 per barrel in February, a range of less than $15.
Implied volatility for US crude is now around its lowest level since before prices surged to a record $147.27 a barrel on July 11, 2008, before plummeting to $32.40 five months later.
Technical chart analysts said oil’s break up on Thursday through resistance levels above previous trading ranges suggested the market could move quite a lot higher.
“With the break of the previous highs, positive momentum is starting to be created in WTI and the next target will be $85.00 per barrel,” said Olivier Jakob, at Petromatrix in Zug. “Above $85.70 per barrel there will be no solid resistance until $90.”
Alejandro Barbajosa in Singapore contributed to this story.