Oil slips from four-month peak, but OPEC cuts, sanctions support

FILE PHOTO: Drilling rigs in the Cromarty Firth near Invergordon, Scotland
FILE PHOTO: Drilling rigs are parked up in the Cromarty Firth near Invergordon, Scotland, Britain January 27, 2015. REUTERS/Russell Cheyne

March 21, 2019

By Henning Gloystein

SINGAPORE (Reuters) – Oil eased from 2019 highs reached earlier in Thursday’s session, but markets remain relatively tight amid supply cuts led by producer club OPEC and U.S. government sanctions on Iran and Venezuela.

U.S. West Texas Intermediate (WTI) crude futures were at $60.11 per barrel at 0756 GMT on Thursday, down 12 cents, or 0.2 percent, from their last settlement. WTI reached its highest level since Nov. 12 earlier in the day, at $60.33 per barrel.

International Brent crude oil futures were at $68.54 a barrel, close to their last settlement after hitting $68.69 a barrel earlier in the session, the highest since Nov. 13.

Crude prices have been pushed up by almost a third since the start of 2019 by supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC), as well as by sanctions enacted against Iran and Venezuela by the United States.

OPEC’s crude oil output has slumped from a mid-2018 peak of 32.8 million barrels per day (bpd) to 30.7 million bpd in February.

The U.S. sanctions are also disrupting supply.

“Venezuelan exports to the U.S. have finally dried up, after the sanctions were placed on them by the U.S. administration earlier this year,” ANZ bank said on Thursday.

Iranian oil exports have also slumped. The United States aims to cut Iran’s crude exports by about 20 percent to below 1 million bpd from May by requiring importing countries to reduce purchases to avoid U.S. sanctions.

The OPEC cuts and sanctions have also tightened supply within the United States.

U.S. crude oil stockpiles last week fell by nearly 10 million barrels, the most since July, boosted by strong export and refining demand, the Energy Information Administration said on Wednesday.[EIA/S]

Stockpiles fell 9.6 million barrels, to 439.5 million barrels, their lowest since January.

Part of the drawdown is due to surging U.S. exports, which stood at a four-week average of 3 million bpd, double the amount this time a year ago, according to the EIA.

The rising exports come amid steep growth in U.S. crude oil production, which returned to its record of 12.1 million bpd last week, making America the world’s biggest producer ahead of Russia and Saudi Arabia.

(Reporting by Henning Gloystein in SINGAPORE and Colin Packham in SYDNEY; Editing by Tom Hogue and Joseph Radford)

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