Oil prices climbed to their highest level since November 2018 on Monday, backed by the OPEC oil supply cuts, the US sanctions against Iran and Venezuela, and strong labor market data in the United States.
The futures on US crude oil WTI rose by 0.41% to 63.34 USD per barrel, while the Brent variety appreciated by 0.41% to 70.63 USD per barrel. Both oil types reached their highest since November last year.
Brent’s prices have risen by more than 30% since the beginning of the year, as OPEC+ has restricted supply for four months, and optimism in terms of trade talks between the US and China has helped raise the demand outlook.
To support prices, OPEC, along with some non-cartel producers, including Russia, committed shrinking supplies by 1.2 million barrels per day since the beginning of the year. Due to these market constraints, surplus stocks disappear while at the same time Brent could reach 75 USD per barrel or even more.
Strong labor market data in the US also reflected the positive trend in oil markets at the beginning of the week. The commodity prices are backed by the danger of supply disruptions from Libya due to the military operations around Tripoli.
Nevertheless, there are also some factors that could lead to a price decrease later during the year. For example, Russia is not very inclined to continue restricting its production and may increase yields if the agreement is not extended beyond July 1. This was stated by Russian Energy Minister Alexander Novak.
The oil production in Russia reached a record 11.16 million barrels last year. The US production is also record – 12.2 million barrels per day by the end of March. Crude oil exports from the United States grew, reaching 3 million barrels per day for the first time this year.
But the market is still under pressure from global economic growth threats, especially if China and the US fail to resolve their trade dispute.
World demand has weakened and existing duties on Chinese goods pose an additional problem. However, measures taken by China to stimulate growth are likely to succeed in supporting the economy in 2019.