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 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.
The firing of a rocket from Yemen toward the Saudi capital of Riyadh this weekend added fuel to the fire, he said. Saudi Arabia is waging a war against Iran-supported rebels in Yemen.
The resignation of Lebanese Prime Minister Saad al-Harri, who called out the destabilizing Iranian influence in his country is also a sign of escalating tensions between Sunni Muslim Saudi Arabia and Shiite-controlled Iran, Lipow added.
"I think [the rally is] just continued follow through on the geopolitical unease that's now filtering through the market," he told CNBC.
In recent weeks, oil prices have been bolstered by a conflict between Iraqi Kurds and the central government in Baghdad that has disrupted supplies, as well as U.S. President Donald Trump's refusal to certify a deal with Iran that lifted sanctions on the nation's energy sector last year.
Signs of stronger demand and declining crude inventories has also boosted prices.
Oil prices are more likely to rise toward $70 a barrel than fall back toward $50 a barrel, Roberto Friedlander, head of energy trading at Seaport Global Securities, wrote in a morning briefing on Monday. He views the events in Saudi Arabia over the weekend as a sign that Crown Prince Mohammad bin Salman is consolidating power as he seeks to reshape the economy, a project that requires the Saudis to keep oil prices near current levels.