Oil tops $73 on Venezuela turmoil, Saudi support for OPEC cuts

Agency Report

Oil prices topped $73 on Tuesday as Venezuela’s opposition leader called on the military to back him to end Nicolas Maduro’s rule and after Saudi Arabia said a deal between producers to curb output could be extended beyond June to the end of 2019.

The situation in Venezuela, an OPEC member whose oil exports have been hit by U.S. sanctions and an economic crisis, was fluid on Tuesday. The government promptly dismissed any suggestion of a military insurrection.

The Saudi comments from Energy Minister Khalid al-Falih came despite pressure from U.S. President Donald Trump to raise output to make up for a supply shortfall expected from tightening U.S. sanctions against Iran.

“There was an uptick even without Venezuela due to Falih’s comments,” said analyst Olivier Jakob at Petromatrix.

Brent crude futures had risen to $73.08 per barrel by 1143 GMT, up 1.44 percent from their last close.

U.S. crude futures were at $64.42, up 1.45 percent.

Brent hit a six-month high above $75 last week because of tightening global markets amid U.S. sanctions on Iran and Venezuela coupled with Russian oil export problems stemming from a contaminated pipeline.

Despite a shaky global economy, oil has surged almost 40 percent since January, lifted by supply cuts led by the Organization of the Petroleum Exporting Countries.

Matt Stanley, a broker with Starfuels in Dubai, said oil prices had risen this year due to the “choking” of supply rather than strong demand.

Tighter sanctions
Falih’s comments, made to Russian state news agency RIA, suggested Saudi Arabia would want to maintain some form of production cut despite Trump’s demand that OPEC raise output.

Bank of America Merrill Lynch said “Iranian oil production will fall to 1.9 million barrels per day in 2H19 from 3.6 million barrels per day in 3Q18 as U.S. sanctions kick in and waivers eventually expire”.

Despite this, the bank said it expected “a nearly balanced market in 2019” as output from OPEC and the United States rises.

French bank BNP Paribas said it expected oil prices “to rise in the near term” as crude producers were “over-tightening the market in the face of unplanned supply outages and resilient oil demand”.

Belarus said on Tuesday that months of work would be needed to restore clean oil supplies via the Druzhba pipeline from Russia to Europe after Western oil consumers suspended imports of Urals crude due to contamination.

BNP said it expected crude markets to climb until the third quarter of 2019, adding that prices would then “start to become vulnerable to a sharp rise in U.S. exports of light crude thanks to pipeline and terminal capacity expansion”.

U.S. exports exceeded 3 million barrels per day for the first time in early 2019 amid a more than 2 million bpd production surge over the past year, to a record of more than 12 million bpd.

Source: Reuters

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