Brent crude has broken $68 per barrel in London, its highest level this year, as exports from Libya were disrupted and Saudi Arabia’s oil minister said that only “Allah” can know the true price of a barrel of oil.
The benchmark has gained 19pc in 2015 following a slide in prices, which began in June but gathered pace in November when the Organisation of the Petroleum Exporting Countries (Opec) decided to leave its production quotas unchanged.
Disrupted supplies from war torn Libya was the main reason given by traders for the spike in crude, which gained more than 2.8pc at the close in London on Tuesday. Exports from Zueitina, one of Libya’s few remaining open oil ports, have been blocked by demonstrations.
Libyan crude is sought after by European refiners because of its high quality. However, output is down to around 500,000 barrels per day (bpd) as factions continue to fight for control of the North African country.
Saudi Arabia and a group of core Gulf states at the centre of Opec are often accused of manipulating the price of crude and acting like a cartel, a charge which they rigorously deny.
However, Saudi oil minister Ali al-Naimi blamed a higher authority for recovering oil prices in an interview with CNBC on Tuesday.
“No one can set the price of oil — it’s up to Allah,” he told the network in Riyadh.
The kingdom is the world’s largest oil exporter with the capacity to pump 12.5m barrels per day of crude if required. However, it has been willing to tolerate prices below $100 per barrel over the last six months in order to restrict high-cost production from North America.
US shale oil output may slump over the next year after a collapse in the number of drilling rigs sinking new wells.
Oil markets are also concerned by political turmoil on the Arabian Peninsula where Iranian backed Houthi rebels have toppled the government. Saudi and its allies are now embroiled in a potentially long-term conflict to restore control to the area, which borders the kingdom and controls a strategic waterway in the Gulf of Aden.
Oil tankers pass Yemen on their way into the Strait of Hormuz, which carries around 17m bpd of crude from the region. Any disruption to this area will have a profound impact on the price of oil despite stockpiles in North America and Europe being at record highs.
However, oil markets remain oversupplied with producers pumping around 2m bpd more than is currently required.
