Oil prices are on course for one of the biggest weekly gains in six years as rising geopolitical tensions and signs of slowing output brought buyers back to the market.
International oil benchmark Brent crude has rallied by as much as 12 per cent since last Friday to hit $54 a barrel, the highest since late August.
US benchmark West Texas Intermediate has also surged, gaining as much as 12.2 per cent this week and moving above $50 a barrel for the first time since July.
The gains have come as Russia’s military intervention in the Syrian conflict has added a new and uncertain dimension to tensions in the Middle East.
US officials said on Thursday that four Russian cruise missiles had fallen in Opec member Iran – a Russian ally in the conflict in Syria. While oil supplies are not directly threatened by Russia's air strikes in Syria, the targeting of rebels fighting the regime of President Bashar al-Assad pits Moscow against oil-rich Gulf states such as Saudi Arabia, which has backed many of the anti-Assad groups.
"Part of this week's rally has been due to some additional geopolitical premium being priced in," said Olivier Jakob, oil analyst at Petromatrix in Zug, Switzerland.
“It has been significant that oil prices have managed to continue a rally despite negative inputs,” he added, pointing to a rise in US crude oil stocks last week and lower estimates of global growth.
Commodities as a group have also rallied, with one closely watched basket of raw materials climbing by its most since 2012, as metals surged on Friday following the announcement of large cuts to zinc production by miner and trading house Glencore.
Oil prices received some additional support from forecasts that US crude oil output could be on the cusp of a significant decline in the coming weeks.
Executives speaking this week at London’s annual Oil & Money gathering of industry heavyweights cautioned that the plunge in prices since last year was starting to have an impact on tight oil production.
Ben van Beurden, Shell's chief executive, said this week that he saw "the first mixed signs" of a recovery in oil prices, which have more than halved since the summer of last year.
Prices fell particularly sharply after Saudi Arabia-led Opec decided against reducing production last November in response to a growing supply glut. A senior Saudi Arabia oil adviser said this week he did not think the glut would last much longer.
– Copyright The Financial Times Limited 2015
