Brent crude oil tops $70 for first time since November as supply tightens

Brent futures touched $70.03, its highest level since Nov. 12, when it last traded above $70. The international benchmark for oil prices settled 9 cents higher at $69.40 a barrel.

U.S. West Texas Intermediate crude settled 36 cents lower at $62.10 a barrel on Thursday. The contract dropped 12 cents in the previous session after briefly hitting $62.99, also the highest since November.

Global benchmark Brent has gained 30 percent this year, while WTI has gained 38 percent. Prices have been underpinned by tightening global supplies and signs of demand picking up.

“There is a clear bias to the upside with the supply restrictions,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney, pointing to supply cuts by OPEC and others, along with sanctions on Iran.

“And 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.

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, a private business survey of China’s service sector showed on Wednesday.

Trade talks between the United States and China made “good headway” last week in Beijing and the two sides aim to bridge differences during further talks, White House economic adviser Larry Kudlow said on Wednesday.

Crude oil is also supported by an agreement between OPEC and allies such as Russia, a group known as OPEC+, to reduce oil output by about 1.2 million bpd this year.

On Thursday, OPEC member Libya was on the brink of open warbetween the North African country’s main political factions. General Khalifa Haftar ordered his forces to march on Tripoli, the seat of the United Nations-recognized government.

Libya has played an outsize role in balancing the oil market because ongoing conflict has contributed to sharp swings in the nation’s output. The involuntary disruptions have helped OPEC tighten the market.

U.S. pressure on Iran is increasing, with a senior Trump administration official saying earlier this week that Washington is considering more sanctions on the Middle Eastern country.

The refinery maintenance season is also drawing to a close and that will provide further demand for crude, said Virendra Chauhan, oil analyst at Energy Aspects in Singapore.

“The physical market is very strong and we are now starting to trade post-turnaround barrels, which should mean physical markets strengthen and flat prices should follow,” he said.

Still, crude oil inventories in the United States rose by 7.2 million barrels last week, as net imports climbed, the Energy Information Administration said on Wednesday. Analysts had forecast a decrease of 425,000 barrels.

U.S. crude production climbed 100,000 barrels per day to a record 12.2 million bpd, after hovering around 12 million to 12.1 million bpd since mid-February, according to preliminary EIA data.

— CNBC’s Tom DiChristopher contributed to this report.