Oil price soars to highest level in years

Oil surged Thursday close to three and a half-year peaks on simmering Mideast tensions and keen US demand.

World oil prices extended Wednesday’s gains on the back of data showing a drop in US stockpiles — indicating improved demand — and expectations that a Russia-OPEC output cap deal will be kept in place.

Tensions in the oil-rich Middle East also kept prices elevated.

“Saudi Arabia still calls the shots on global oil markets, and it is increasingly obvious the Saudis are comfortable with oil at $80 or more,” said Interactive Investor analyst Lee Wild.

“Add a drop in weekly US oil reserves to the mix and the only way for crude prices is up.”

In early morning deals, oil surged to summits last seen in November 2014 before paring gains.

London Brent struck $74.44 per barrel and New York crude touched $69.27.

European equity markets meanwhile diverged amid lingering fears over Syria and a possible China-US trade war, but London rose 0.2 percent despite news of sliding March retail sales.

The British capital’s benchmark FTSE 100 index was given a shot in the arm from media reports that Japan’s Takeda Pharmaceuticals was mulling a takeover tilt at Shire.

Shire, which is based in Ireland and listed on the London stock market, saw its share price rocket 6.19 percent to 3,986.5 pence.

Both companies have yet to comment on the latest takeover speculation, but Takeda had stated in March that it was considering the purchase of Shire.

Asian markets enjoyed another day of gains Thursday as the region’s energy firms also tracked a surge in oil prices.

Fresh hopes that Donald Trump and North Korea’s leader Kim Jong Un will hold a historic summit within months also provided some much-needed optimism.

The positive trading environment is a far cry from the unease felt at the start of the week after US-led strikes on Syrian targets — in response to an alleged chemical attack — sparked worries of a confrontation with Russia, which is an ally of the Damascus regime.

However, reports have suggested Russian President Vladimir Putin is looking to ease tensions as he faces fresh sanctions.

China’s announcement of a timetable to remove restrictions on foreign ownership in its car market, the world’s biggest, also lifted optimism that a simmering trade war with the US can be avoided.

Tough rules on doing business in the country’s auto sector had been a major source of anger for Trump, who has already threatened tariffs on billions of dollars of Chinese imports in recent weeks as part of his “America First” protectionist agenda.

However, in its quarterly report on the US economy, the Federal Reserve warned there were concerns about the trade tensions among businesses and farmers, who had seen prices rise already.

The central bank’s Beige Book report said the world’s top economy continued to see moderate growth and it expected to lift interest rates twice more this year, having already hiked them in March.

Meanwhile, the British pound struggled to bounce back against the dollar after diving from post-Brexit vote highs on data Wednesday showing a surprise drop in British inflation.