Brent pushes closer to $70 amid tightening global supply

Tokyo — Oil prices were mixed on Thursday, with Brent edging higher towards the psychological $70 level after easing in the previous session on data showing a surprise build in US inventories.

Brent futures were up 5c at $69.36 a barrel by 2.24am GMT. On Wednesday, Brent dipped 6c, after touching $69.96, the highest since November 12, when it last traded above $70.

US West Texas Intermediate (WTI) crude fell 3c to $62.43 a barrel. It dropped 12c in the previous session after briefly hitting $62.99, also the highest since November.

Global benchmark Brent has risen nearly 30% so far in 2019, while WTI has gained nearly 40c, with prices underpinned by tightening global supply and signs of demand picking up.

“There is a clear bias to the upside with the supply restrictions,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney, pointing to supply cuts by oil cartel Opec and others along with sanctions on Iran.

“And there’s a much better than expected demand picture after the recent China and US PMI numbers, along with a potential kicker from any US-China trade agreement,” he said.

The Caixin-Markit services purchasing managers index (PMI) rose to 54.4, the highest since January 2018 and up from February’s 51.1, a four-month low, a private business survey of China’s service sector showed on Wednesday.

Trade talks between the US and China made “good headway” last week in Beijing and the two sides aim to bridge differences during further talks, White House economic adviser Larry Kudlow said on Wednesday.

Crude oil is also supported by an agreement between Opec and allies such as Russia, a group known as Opec-plus, to reduce oil output by about 1.2-million barrels a day in 2019.

US pressure on Iran is also increasing, with a senior Trump administration official saying earlier this week that Washington is considering more sanctions on the Middle Eastern country.

Still, crude oil inventories in the US rose by 7.2-million barrels last week, as net imports climbed, the Energy Information Administration (EIA) said on Wednesday. Analysts had forecast a decrease of 425,000 barrels.

US crude production climbed by 100,000 barrels a day to a record 12.2-million barrels a day, after hovering around 12-million to 12.1-million barrels a day since mid-February, according to the data from the Energy Information Administration. 

Reuters