Oil steady amid tightening supply, but capped by economic slowdown

Andrew Cummings
April 11, 2019

Brent crude futures, the global benchmark for oil prices, were up 77 cents, or 1.1 per cent, at $71.38 per barrel U.S. West Texas Intermediate crude oil futures rose 33 cents, or half a per cent, to $64.31 per barrel.

Brent and WTI crude oil futures have risen by around 30 percent and 40 percent respectively since the start of the year.

On Tuesday, the 9th of April 2019, during the midday Asia Pacific trading hours, Brent crude hit a five-month high above $71, while U.S. crude had resurfaced over $64.50 level for the first time after November 1st, 2018.

Crude oil prices opened higher Wednesday with ongoing tensions in Libya, and with sanctions on Iran and Venezuela hindering secure supply, however, a weaker global growth expectation could keep some cap on rising prices.

THE price of Bonny Light, Nigeria's premium oil grade has risen from $70 to $71.74 per barrel in the worldwide market, the highest in 2019, as the Organisation of Petroleum Exporting Countries, OPEC, continue to eliminate excess supply from the volatile market.

USA crude oil stocks rose more than expected last week to the highest in almost 17 months as imports climbed, while gasoline inventories posted their steepest drawdown since September 2017, the Energy Information Administration said on Wednesday.

The U.S. sanctions on Iran and Venezuela also caused supply declines in these countries, which are forecast to see their outputs decrease further.

"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 nearly 47% of the reduction seen from OPEC", ING added.

The report said USA crude stockpiles rose to their highest level since November 2017, amid rising imports.

The figures could add to a debate within OPEC+ about whether to maintain oil supply cuts beyond June.

Besides, the United States crude had also experienced a five-month high to $64.51 on Tuesday (April 9th), largely led by a sanction on Venezuelan and Iranian crude amid a surging U.S. oil inventory.

On the demand side, there are concerns that an economic slowdown will soon hit fuel consumption.

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