Oil prices surged above $80 a barrel on Friday, reaching a 14-month high, with the United States and Canada announcing plans to impose a ban on exports of heavy crude oil from the US, making it easier for shippers to transport light grades of crude overseas.
The tightness in the North Sea oil market, resulting from new North Sea taxes and an impending pipeline closure, failed to prevent Brent crude climbing over $80 a barrel on Friday, touching its highest since November 2016 and pushing shares in UK oil producers to a ten-month high.
Brent crude rose more than $1 to $79.64 per barrel, gaining more than 2% for the week.
The impasse between the US and Canada over a softwood lumber dispute, which erupted after the United States announced a 10% tariff on Canadian lumber imports last week, also pressured Canada’s dollar. The currency has struggled to gain ground since Britain voted to leave the European Union.
The US Department of Commerce said it would effectively restrict exports of oil from the US produced from prolific shale formations that flow from shale rocks under the ground. The ban on crude exports did not apply to Canada.
The US will stop issuing licenses for exports of heavy crude and will require companies seeking such licenses to demonstrate that they have an available transportation pipeline or rail to carry crude out of the US if the imports are worth at least $1.50 a barrel more than current prices, the US Energy Information Administration said.
Oil prices have been strengthening this week with analysts and traders saying they think a global glut will soon dissipate as the Organisation of the Petroleum Exporting Countries cuts output.
“We remain of the view that WTI is going to hit $80 in a couple of months and settle down, either to $68 or $70 and a few weeks or months after that it will hit $75,” said Matthew Smith, director of commodity research at ClipperData.
Front-month Brent crude futures, the international benchmark for oil prices, gained 88 cents, or 2.7%, to $79.32 a barrel by 1.15pm GMT. US West Texas Intermediate crude futures were up 77 cents, or 2.6%, at $76.67.
Over the last year, crude prices had risen every month except for May, when they plunged 6%. They are set to add more than 7% this month, but still remain 13% lower than earlier this year.
While OPEC and other major exporters agree on the need to curtail production, supplies from several Middle East-dominated producers have increased recently.
US drillers added one oil rig in the week to June 22, bringing the total count up to 799, the lowest level since May 2010, energy services firm Baker Hughes said on Friday. The rig count is a measure of the number of rigs drilling for oil in the United States. Rigs are typically deployed to find and produce new oil and gas.
US crude oil production rose by 58,000 barrels per day to 9.85 million bpd, data from the Energy Information Administration showed on Wednesday. That was the ninth straight weekly increase.