Investing.com - Crude oil prices settled at three-year highs amid ongoing expectations that geopolitical tensions in the Middle East could add a possible ‘fear premium’ to oil, while continued OPEC cuts supported sentiment.
On the New York Mercantile Exchange crude futures for May delivery rose 25 cents to settle at $67.07 a barrel, while on London's Intercontinental Exchange, Brent rose 0.03% to trade at $72.08 a barrel.
Geopolitical tensions eased somewhat on Thursday after U.S. President Donald Trump said military action in Syria may not be imminent, backtracking from his aggressive stance on Wednesday. But traders continued to bet that geopolitical tensions in the oil-rich Middle East, could lead to supply disruptions, supporting a further rally in oil.
RBC said that a critical concern is “whether the war spreads beyond Syria’s geographical boundaries,” which could trigger a “wider regional conflagration, adding a possible 'fear premium' to oil.”
The bank also cited the proxy war in Yemen as an additional risk, reducing any hope the U.S. would continue to support the Iranian nuclear deal.
"In our view the intensification of these proxy fights further dims any hope of the White House remaining in the Iranian nuclear deal when the sanctions waivers once again come up for renewal," RBC said.
If Trump does scrap the deal, it could lead to the re-imposition of secondary sanctions on Iran, pressuring countries to reduce their purchases of Iranian crude, denting global supplies.
Crude oil prices were also supported by ongoing OPEC cuts to reduce the glut in supplies as the oil cartel revealed in its monthly report, total production from the group fell to the lowest since March 2017.
OPEC output fell by 201,400 barrels a day last month, the most since November, to 31.96 million barrels a day, led by Venezuela, Saudi Arabia and Libya.
Yet, concerns linger over non-OPEC production, which was revised higher for the fifth-straight month to more than 1.7 million barrels a day this year, led by ongoing expansion in U.S. oil output.
The OPEC monthly report came a day ahead of the International Energy Agency report, slated for Friday.
Rising U.S. production, meanwhile, led to a massive uptick in U.S. crude supplies, according to data from the Energy Information Administration on Wednesday.