Oil Hits 2019 High Amid Supply Cuts

Cornelia Mascio
Marzo 15, 2019

Crude oil is navigating levels last seen in mid-November 2018 further north of the $58.00 mark per barrel, always bolstered by a softer buck and a generalized better tone in the risk-associated complex.

Brent and West Texas Intermediate crude oil futures reached four-months highs on Thursday, as a production curb agreement by OPEC and its partners along with US sanctions on Iran and Venezuela tightened global supplies.

Oil rallied on Wednesday on US government data showing a surprise fall in crude inventory and a lower-than-expected estimate of USA crude production growth.

Production is expected to increase 1.35 million bpd compared to the previous year, but will grow more slowly than the previous forecast of 1.45 million bpd.

Oil futures rallied about 2 percent on Wednesday as US crude inventories unexpectedly fell and an official forecast of crude oil supply growth from the world's top producer was revised lower.

OPEC sources have said an extension of the supply-cutting pact is the likely scenario.

On the imports side, EIA said that most of the reduction in USA petroleum imports was of light, sweet crude oil, as those barrels were replaced by domestic production of a similar quality. The group will discuss this at a meeting in April, although top exporter Saudi Arabia has said a decision may not be made until another gathering in June. Crude oil imports to the USA fell last week by 523,000 bpd to 6.4 million bpd.

Meanwhile, US sanctions have helped slash output from OPEC members Venezuela and Iran.

In 2018, U.S.net petroleum trade volume, which stands for imports minus exports, reached 2.3 million barrels per day, which was its lowest level since 1967, said EIA.

Brent was still at $67.75 per barrel at 0244 GMT, up 20 cents, or 0.3 percent, from its last close.

US crude oil futures settled at $58.26 a barrel, rising $1.39 cents, or 2.44 percent.

"With OPEC's cuts in full-swing. persistent supply issues and a deteriorating picture on Venezuela, oil is looking well supported", said Jasper Lawler, head of research at futures brokerage London Capital Group.

Saudi Energy Minister Khalid Al-Falih suggested last month that he favored maintaining output curbs when asked to comment on U.S. President Donald Trump's tweet on February 25 demanding OPEC to "relax" its stance on tightening supplies.

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