Published: Mon, March 18, 2019
Finance | By Kristine Clayton

Oil prices seek balance with supply cuts, low demand

Oil prices seek balance with supply cuts, low demand

While the USA sanctions on Iran and Venezuela have hindered their crude exports, OPEC and Russia's impeded production for the first half of this year is set to lower overall supply on the global market and push prices higher.

Oil prices were stable on Friday, propped up by production cuts led by OPEC and as US sanctions against Venezuela and Iran likely created a slight deficit in global supply in the first quarter of 2019.

The cost of the futures contracts of Brent crude oil for May 2019 delivery gained 0.71% amounting to $68.03 per barrel on London's ICE as of 11:10 a.m. Moscow time today, according to the trading data.

Under such conditions, the West Texas Intermediate lost seven cents and traded at 58.54 dollars per barrel, after reaching 58.95 earlier, its peak so far this year.

USA crude ended the week 4.1 percent higher, and Brent was up 1.9 percent. Venezuela, which is in the middle of a political and economic crisis, saw production decline by 142,000 bpd in February.

Even so, with the demand for OPEC crude forecast at 30.46 million bpd, the report indicates that the market would still face a small 2019 surplus if OPEC kept pumping at February's rate, as rivals such as the United States boost output. The group will discuss this at a meeting in April, although top exporter Saudi Arabia has said a decision may not be made until another gathering in June.

Oil prices have risen since the beginning of this year thanks to supply cuts led by OPEC.

Production is expected to increase 1.35 million bpd compared to the previous year, but will grow more slowly than the previous forecast of 1.45 million bpd.

"Oil demand concerns are overdone", Goldman Sachs said in a note on Friday.

Speaking about Azerbaijan oil production indicators Azerbaijan exported 5.78 million tons of oil in January-February 2019, which is 58 percent more than in two months of past year, Trend reports with reference to the State Customs Committee of the country on Friday.

A continuation of the tariff war between the world's top two economies could dent growth in fuel demand and hit prices. If the oil rig count fall continues further, it might drag U.S. crude oil production in the coming weeks.

The U.S. bank said January global crude oil demand growth was "nearly 2.0 million barrels per day, with strength visible in both emerging markets and developed economies".

OPEC, Russia and other non-member producers, an alliance known as OPEC+, are reducing output by 1.2 million bpd from January 1 for six months.

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