Oil prices up on Opec output cuts, sanctions

SINGAPORE: Oil prices rose on Tuesday amid Opec-led supply cuts and US sanctions against Iran and Venezuela, although analysts expect surging US output and concerns over economic growth to keep markets in check. US West Texas Intermediate (WTI) crude oil futures were at $52.69 per barrel at 0751 GMT, up 28 cents, or 0.5 per cent, from their last close.
The ongoing closure of parts of the Keystone pipeline that brings Canadian oil into the United States also helped prop up WTI, traders said. International Brent crude futures were up 38 cents, or 0.6 per cent, at $61.89 per barrel.
Analysts said markets are tightening amid voluntary production cuts led by the Organization of the Petroleum Exporting Countries (Opec) and because of US sanctions on Venezuela and Iran.
But some said supply-side risks were not receiving enough focus.
“We believe that oil is not pricing in supply-side risks lately as markets are currently focused on US-China trade talks, ignoring the risks currently in place from the loss of Venezuelan barrels,” US bank JP Morgan said in a weekly note.
Should US-China talks to end trade disputes between the two nations have a positive outcome, the bank said oil markets would “switch attention from macro concerns impacting future demand growth to physical tightness and geopolitical risks impacting immediate supply.’’
With Opec engaged in supply management and the Middle East entangled in conflicts while production outside the group surges, Bank of America Merrill Lynch said Opec’s global market share would fall as its outright output drops to 29 million barrels per day (bpd) in 2024 from 31.9 million bpd in 2018.
Growing US supply and a potential economic slowdown this year could also cap oil markets.
“The worries of oversupply stemming from the US will likely remain a dominant theme as we approach the warmer months,” said Edward Moya, analyst at futures brokerage Oanda. — Reuters