Mubasher: Oil rose on Tuesday, trading higher than the highest level so far this year, as output cuts led by the Organization of Petroleum Exporting Countries (OPEC) provided a boost.
In addition, US sanctions against oil-rich Iran and Venezuela offered support for prices, despite a surge in US crude production kept a lid on gains.
By 8:43 am GMT, US Nymex crude futures went up 0.34% to 59.29 per barrel (pb), having hit $59.23 pb in the prior session, while international benchmark Brent futures rose 0.52% to $67.89 pb, hovering near this year’s high of $68.14 pb late last week.
OPEC cancelled its scheduled meeting next April, technically extending its production cuts that have been in effect since the start of this year, until at least June, when the next meeting is due.
An alliance of the producer club and its allies, including Russia, known as OPEC+ agreed last December to withhold supply starting from last January to rein in a price slump in the second half of last year and to mop up a global glut.
“The OPEC+ deal has brought stability to crude prices and signs of an extension have taken crude higher,” Singapore-based futures brokerage OANDA senior market analyst Alfonso Esparza told Thomson Reuters.
Further supporting prices were due to US sanctions against Iran and Venezuela’s hydrocarbon industries, traders told the news agency.
Because of prospects of further tightening for the coming months, the Brent forward curve went into backwardation since the beginning of this year.
This meant that prices for immediate delivery are higher than those for future dispatch. Brent deliveries for next May are now nearly $1.20 pb higher than those for last December.
On the other hand, US crude production, which surged 2 million barrels per day (bpd) since early last year, to almost 12 million bpd, caught the market focus.
On the demand front, concerns persisted over fuel consumption which is expected to be curtailed by an economic slowdown.
“Risks are skewed to the downside,” Bank of America Merrill Lynch (BAML) said, projecting “[a] global demand growth of 1.2 million bpd year-on-year in 2019 and 1.15 million bpd during 2020.”
