Oil prices rise on ongoing OPEC-led supply cuts

Gladys Abbott
March 12, 2019

Brent crude futures were at $65.04 per barrel, up 30 cents, or 0.5 per cent.

Crude oil prices rose 0.13 percent to Rs 3,972 per barrel on March 12 as speculators created fresh positions amid positive cues from global markets. It projected that global oil consumption will increase by about 1.2 million barrels a day, or 1.2 percent, each year to 2024.

The so-called OPEC+ alliance, including Russian Federation and other producers, agreed in December to reduce supply by 1.2 million bpd from 1 January for six months, which will help to boost oil prices after last year's downward trend.

Saudi Arabia has voluntarily cut its supply by more than the deal requires and in April will keep output "well below" 10 million bpd, the Saudi official said - below the 10.311 million bpd that the kingdom had agreed to pump.

Crude oil prices are inching higher this week and remain propped up by speculations over a US-China trade agreement, the so-called "Saudi put", tight conditions in the US markets (amidst US net imports in historic low levels and the rising activity in refiners ahead of the summer session), the current OPEC+ agreement to cut oil output and ongoing US sanctions against Iran and Venezuela crude oil exports.

On Sunday, Saudi oil minister Khalid al-Falih said it would be too early to change OPEC+ output policy at the group's meeting in April. The group, known as OPEC+, agreed to reduce supply by 1.2 million bpd for six months.

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The United Arab Emirates in February exceeded its OPEC target for oil output cuts, achieving 119 percent of its goal, the country's energy minister said on Tuesday at an energy conference.

In additional to the pledged output reduction, the crude oil markets have been getting an additional boost from the US sanctions on Iran and Venezuela.

Mr. Falih said total global oil demand is set to grow by around 1.5 million bpd this year.

Oil prices have been offset this year by OPEC members' output cuts, which they agreed upon last year, while U.S. sanctions on the oil industries of OPEC countries Iran and Venezuela have also pushed supplies down. This has disrupted oil exports from the South American giant whose shipments are already lower due to the US sanctions and the country's continuously declining production over the past three years. "The EIA report reined some of that in, and the report was supportive in that respect", said John Kilduff, a partner at Again Capital LLC in NY.

The IEA forecasts demand for OPEC crude will drop in 2020 and then rise to average 31.3 million bpd in 2023. This report is expected to show that inventories rose by 2.9 million barrels.

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