Oil hit a two-month high close to $64 a barrel recently, as OPEC-led supply cuts and US sanctions against Venezuela’s petroleum industry offset forecasts of weaker demand and an economic slowdown.
The Organization of the Petroleum Exporting Countries and its allies started a new round of supply cuts in January’19. These curbs, led by Saudi Arabia, have been compounded by involuntary losses that the Venezuelan sanctions could deepen.
Brent crude, the global benchmark, strike $63.63 a barrel, the highest since Dec. 7, and was up 23 cents at $62.98 as of 1145 GMT.
US crude strike a 2019 high of $55.75 and was later up 5 cents at $55.31.
Olivier Jakob, oil analyst at Petromatrix said, “You have the sanctions on Venezuela, on top of the reduced supply from Saudi Arabia, There’s no sign of overhang in the crude oil markets.”
OPEC supply dropped in January by the big amount in two years, a Reuters survey last week recorded. That offset limited compliance with the output-cutting deal so far by non-OPEC Russia.
The US sanctions on Venezuela will limit oil transactions between Venezuela and other countries and are similar to those imposed on Iran previous year, some analysts said after examining details declared by the government.
Underlining the lack of excess supply, Jakob cited a speedily clearing West African crude market and the structure of Brent crude futures, in which the first-month contract is trading near the price of the second month.
While OPEC and its allies are cutting output, the United States is expanding supply. In spite of that, figures exhibited a fall in the number of US oil rigs to their lowest in eight months, lending prices some support.
Carsten Fritsch, analyst at Commerzbank said, “This points to a less pronounced rise in US oil production, the oil market is more or less balanced”. Citing the drop in OPEC output to a level close to forecast demand for the group’s crude.
The main drag on prices has been concern about a possible slowdown in demand this year because of a weaker outlook for economic growth and developments like the US-China trade dispute.
US President Donald Trump last week stated he would meet his Chinese counterpart Xi Jinping in the coming weeks to attempt to settle the dispute, and there are chances that the two sides will come to an agreement.