Concern about disruptions supports oil

Singapore — Oil prices rose on Tuesday as risks of supply disruptions from Venezuela, Libya, Nigeria and Iran triggered the expectation of a tightening market.

International Brent crude oil futures were at $76.37 a barrel at 2.15am GMT, up 16c, or 0.2%, from their last close.

US West Texas Intermediate (WTI) crude futures were up 9c, or 0.1%, at $68.96 a barrel.

Despite some concerns about an economic slowdown because of the US-China trade conflict, crude supplies are relatively tight due to disruptions as well as voluntary restraints on output by oil cartel Opec.

The cartel’s monitoring committee found that oil producers participating in a supply-reduction agreement, which includes non-Opec member Russia, cut output in July by 9% more than called for.

The findings for July compare with a compliance level of 120% for June and 147% for May, meaning participants have been steadily increasing production.

Opec and its allies agreed in late 2016 to cut output from 2017 by about 1.8-million barrels a day versus October 2016 levels.

The International Energy Agency (IEA) on Monday also warned of further supply disruptions, especially from Venezuela, where an economic crisis has cut deep into the Opec-member’s oil output.

Venezuelan crude oil exports have halved in the previous two years to just 1-million barrels a day by mid-2018, according to trade flow data.

“We can expect a further fall,” the agency’s executive director, Fatih Birol, told Reuters in Norway on Monday.

Birol also warned that African Opec-members Libya and Nigeria “seem both still fragile countries” despite some recent improvements.

Birol said it was too early to gauge the impact of the US sanctions that will target Iran from November.

Beyond a relatively tight supply outlook, analysts said a fall in the dollar over the past two weeks was also supporting crude, as it makes oil purchases cheaper for countries using other currencies at home.

“The weaker US-dollar helped commodities in general,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

Reuters