Oil hits 2019 high on Opec-led cuts

Singapore  — Brent crude oil prices hit 2019 highs above $65 a barrel on Friday, spurred by Opec-led supply cuts and a partial shutdown of Saudi Arabia’s biggest offshore oilfield.

Brent rose as high as $65.10, pushing past the $65 mark for the first time this year, before edging back to $64.89 a barrel by 5.31am GMT. That was still 0.5% above the last close.

The international benchmark for oil prices is at a near three-month high and set for a 4.5% gain for the week.

US West Texas Intermediate (WTI) crude futures were at $54.61 a barrel, up 20c, or 0.4%, from their last settlement.

Traders said prices were pushed up by the partial closure of Saudi Arabia’s Safaniyah, its biggest offshore oilfield with a production capacity of more than 1-million barrels a day.

The shutdown occurred earlier this week, a source said, and it was not immediately clear when the field would return to full capacity.

The partial closure comes on top of voluntary supply cuts led by producer cartel Opec, of which Saudi Arabia the de-facto leader, aimed at tightening the market.

The group as well as some non-Opec producers including Russia late last year agreed to cut crude output by a joint 1.2-million barrels a day. Top exporter Saudi Arabia said it would cut even more in March than the deal called for.

Russia has cut its oil production by 80,000-90,000 barrels a day from its level in October, Moscow’s reference level for its cuts, the country’s energy minister said.

“Brent should average $70 per barrel in 2019, helped by voluntary [Saudi, Kuwait, United Arab Emirates] and involuntary [Venezuela, Iran] declines in Opec supply,” Bank of America Merrill Lynch said in a note.

It also expects “a 2.5-million barrels a day drop in Opec supply from the fourth quarter of 2018 into the fourth quarter of 2019”.

Standing against these declines is soaring US crude production, which rose by more than 2-million barrels a day last year, to 11.9-million barrels a day, making America the world’s biggest oil producer.

Most analysts expect US output to rise past 12-million barrels a day soon, and perhaps even hit 13-million barrels a day by the end of the year.

Rising US shale oil supply, increasing spare capacity within Opec and stagnating fuel consumption meant the medium-term oil price outlook was lower, Bank of America Merrill Lynch said.

“We see growing downside risks to medium-term oil prices on rising US supply and slower consumption,” the US bank said. It expected Brent to range between $50 and $70 a barrel in the coming five years.

Reuters

Source: businesslive.co.za