Crude oil prices are rising on Wednesday, backed by continuing cuts by the Organization of Petroleum Exporting Countries (OPEC) and the US sanctions against Iran and Venezuela.
The futures on US crude oil WTI with delivery in May rose by 0.51% to 57.16 USD per barrel. The Brent variety recorded a price increase of 0.27% to 66.85 USD per barrel.
In Venezuela, power cuts left the country without electricity for six days, making it difficult for hospitals to keep equipment running and food spoils on the background of tropical high temperatures. There is also a problem with the country’s main oil terminal. The problems with the electrical system are likely to accelerate the loss of 700,000 barrels of oil per day in the total volume of supplies.
However, not all signals indicate tightening of the crude oil market. The National Australia Bank said the picture of the prospects for the oil market is mixed. According to bank analysts, worries about economic growth and large US supply growth weaken price pressures, while the market is balanced by the limited supply of OPEC and the US sanctions against Venezuela and Iran.
“Overall, we are seeing a gradual increase in oil prices this year, and our forecast for Brent is to reach 70 USD per barrel by the end of the year”, said National Australia Bank.
The US crude oil production is expected to average 12.30 million barrels per day in 2019, the US Energy Information Administration (EIA) said on Tuesday, up 1.35 million barrels per day from the prior year, but growing more slowly than the agency’s previous forecast of a 1.45-million barrels per day rise.
The EIA forecast output in 2020 will rise by 730,000 barrels per day to 13.03 million barrels per day, a smaller increase than it previously estimated.
The API reported a surprise draw in crude oil inventories
The American Petroleum Institute (API) reported a surprise draw in crude oil inventories of 2.6 million barrels for the week ending March 8, coming in significantly under analyst predictions that crude oil inventories would build by 2.655 million barrels.
Last week, the API reported a large surprise build in crude oil of 7.29 million barrels. A day later, the EIA supported API’s account of a large gain, estimating that crude inventories had climbed by 7.1 million barrels. Including this week’s data, the net draw is just 640,000 barrels for the ten reporting periods so far this year.
Distillate inventories increased by 195,000 barrels, compared to an expected draw of 1.858 million barrels for the week.
Crude oil inventories at the Cushing, Oklahoma facility fell by 1.1 million barrels for the week.
OPEC+ cuts remain in place
The OPEC+ cuts remain in place, and Saudi Arabia has suggested that it would maintain output well below its required levels. As part of the Vienna agreement in December, Saudi Arabia agreed to limit output to 10.3 million barrels per day. However, as of March, Saudi officials said that they would only produce 9.8 million barrels per day. More recently, Saudi Arabia indicated it would maintain the 9.8 million barrels per day level through April, a sign that even as oil prices inch up, Riyadh would rather err on the side of doing too much rather than too little.
Saudi oil minister Khalid al-Falih also indicated that the OPEC production cuts could remain in place beyond June.
Combined, Venezuela and Saudi Arabia have provided a jolt to the market.