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Oil climbs on OPEC output curbs; US sanctions kick in

Oil climbs on OPEC output curbs; US sanctions kick in

Mubasher: Oil prices rose on Tuesday as supply curbs by the Organization of Petroleum Exporting Countries (OPEC) and US sanctions against Iran and Venezuela bit.

However, gains were capped by a surge in US production and worries about global economic growth.

By 8:38 am GMT, US Nymex crude futures rose 0.67% to $52.76 per barrel (pb), while international benchmark Brent futures climbed 0.72% to $61.95 pb.

Nymex had some support the shutdown of parts of the Keystone pipeline that delivers Canadian oil into the US.

Voluntary supply curbs by OPEC along with US sanctions against oil-rich Iran and Venezuela have tightened market supplies, analysts told Thomson Reuters.

Nevertheless, supply-side risks were not receiving enough focus from market participants.

“We believe that oil is not pricing in supply-side risks lately as markets are currently focused on US-China trade talks, ignoring the risks currently in place from the loss of Venezuelan barrels,” JP Morgan said in a weekly note.

 If the US-Sino talks yield positive results, oil prices would “switch attention from macro concerns impacting future demand growth to physical tightness and geopolitical risks impacting immediate supply,” the US bank said.

As OPEC is engaged in supply management, the Middle East is embroiled in political conflicts, and non-OPEC production surges, the producer club’s global market share would shrink as its output declines to 29 million barrels per day (bpd) in 2024 from 31.9 million in 2018, Bank of America Merrill Lynch told Reuters.

A surge in US supply and an impending economic slowdown this year could keep a lid on oil markets.

“The worries of oversupply stemming from the US will likely remain a dominant theme as we approach the warmer months,” futures brokerage OANDA market analyst Edward Moya told Reuters.