US sanctions and supply cuts keep oil buoyant

Singapore — Oil prices edged back towards five-month highs on Wednesday, supported by ongoing supply cuts by producer club Opec and US sanctions against oil exporters Iran and Venezuela.

International benchmark Brent futures were at $70.83 per barrel at 00.56 GMT, up 22c, or 0.3%, from their last close.

US West Texas Intermediate (WTI) crude oil futures were at $64.26 per barrel, up 28c, or 0.3%, above their last settlement.

Both benchmarks hit five-month highs on Tuesday, before easing on global growth worries and concerns about a rise in Russian supplies.

Oil markets have been tightened this year by US sanctions on oil exporters Iran and Venezuela, as well as supply cuts by the producer club of the Organization of the Petroleum Exporting Countries (Opec) and some non-affiliated producers, a group known as Opec+.

As a result, Brent and WTI crude oil futures have risen by about 40% and 30% respectively since the start of 2019.

“The global oil market is clearly moving back towards balance thanks to Opec+ production cuts. Opec production has fallen 1.98-million barrels per day (bpd) from October levels,” ING bank said in a note.

The Dutch bank said the reduction was not only down to voluntary supply cuts, which the group started this year to prop up prices.

“Venezuelan oil output is estimated to have fallen from 1.19- million bpd in October to 890,000 bpd in March, while output from Iran has fallen from 3.33-million bpd to 2.71-million bpd due to sanctions. Declines from these two exempt countries account for almost 47% of the reduction seen from Opec,” ING said.

Despite the Opec-led cuts, not all regions are in tight supply.

Oil production in the US has risen by more than 2-million barrels per day since early 2018, to a record 12.2-million bpd.

“WTI has not seen the same strength [as Brent] … given the relatively more bearish fundamentals in the US market,” said ING bank.

“US crude oil inventories remain stubbornly high,” it said.

US crude stocks rose 4.1-million barrels in the week to April 5, to 455.8-million barrels, data from industry group the American Petroleum Institute showed on Tuesday. 

Reuters