Oil prices surged to their highest levels since the summer of 2015 on Monday as a major political shakeup in Saudi Arabia underpinned a rally fueled by geopolitical risk, analysts said.
Crude futures hit the new highs overnight after the powerful Saudi Crown Prince Mohammad bin Salman coordinated the arrest of several princes and ministers, ostensibly as part of crackdown on corruption.
Prices pulled back in morning trade as the market digested a wealth of analysis on the Saudi purge, but futures suddenly shot higher at midday. International benchmark Brent crude oil topped $64 a barrel for the first time since June 2015. Meanwhile U.S. West Texas Intermediate crude broke above $57, a level the market has not seen since July 2015.
WTI finished Monday's session $1.71 or 3.1 percent, higher at $57.35. Brent was trading up $2.04, or 3.3 percent, at $64.11 by 2:27 p.m. ET.
U.S. crude intraday performance
Analysts cautioned against pinning the surge on any one headline, or even the Saudi arrests alone. Instead, they said a growing cloud of geopolitical uncertainty was unleashing animal spirits in an already bullish market.
"You can grab all sorts of different headlines when you have a runaway market, and this is a runaway market right now," said Tom Kloza, global head of energy analysis at Oil Price Information Service.
In this kind of environment, "people throw caution to the wind, and this is like the grand finale of fireworks," he said.
On Monday, Nigeria's oil minister signaled his country might be ready to contribute to OPEC-led output cuts to help bolster the market. OPEC has aimed to keep 1.8 million barrels a day off the market this year to shrink brimming global crude stockpiles. Nigeria, OPEC'a biggest African producer, was exempt because a wave of attacks sidelined much of its oil supply last year.
"We're in a bullish phase, so any kind of comment like this, the market seems to be reacting strongly to," said John Kilduff, founding partner at energy hedge fund Again Capital.
Andy Lipow, president of Lipow Oil Associates, also noted that the Niger Delta Avengers, the group behind energy sector sabotage in Nigeria, backed out of a ceasefire on Friday.