SINGAPORE (Reuters) – Oil prices rose on Tuesday, lifted by healthy demand and output cuts led by producer group OPEC, although the gains were capped by the ongoing surge in U.S. supply while analysts warned of risks to the global economy.
FILE PHOTO: Drilling rigs are parked up in the Cromarty Firth near Invergordon, Scotland, Britain January 27, 2015. REUTERS/Russell Cheyne
U.S. West Texas Intermediate (WTI) crude oil futures CLc1 were at $56.92 per barrel at 0636 GMT, up 13 cents, or 0.2 percent, from their last settlement.
Brent crude futures LCOc1 were at $66.65 per barrel, up 7 cents, or 0.1 percent.
Bank of America Merrill Lynch said despite economic headwinds “we still see Brent prices averaging $70 per barrel this year and expect WTI to lag, averaging $59 per barrel in 2019.”
This was partly due to demand for marine diesel expected from next year as part of new fuel rules from the International Maritime Organization, it said.
“With diesel yields already maxed out, refiners may need to lift runs in 2H19 to meet rising demand for marine distillates,” it said.
Oil prices have been receiving broad support this year from supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and non-affiliated allies like Russia aimed at tightening markets.
Saudi Arabia plans to cut its crude oil exports in April to below 7 million barrels per day (bpd), while keeping its output “well below” 10 million bpd, a Saudi official said on Monday. That compares to production of around 10.14 million bpd in February.
Traders also pointed to the political and economic crisis in OPEC-member Venezuela as a driver for oil prices.
Venezuela’s opposition-run congress on Monday declared a “state of alarm” over a five-day power blackout that has crippled the country’s oil exports and left millions of citizens scrambling to find food and water.
SURGING U.S. OUTPUT
Offsetting OPEC efforts to prop up prices and the impact of disruptions like Venezuela is a surge in U.S. oil supply.
The United States will drive global oil supply growth over the next five years, adding another 4 million bpd to the country’s already booming output, the International Energy Agency said on Monday.
U.S. crude oil output will rise nearly 2.8 million bpd, growing to 13.7 million bpd in 2024 from an average of just under 11 million bpd in 2018, the IEA said, making the United States by far the biggest oil producer in the world.
With U.S. production booming, the country needs to import less and is increasingly turning abroad to sell surplus oil.
“The decrease in net crude oil imports (December, 2018) was driven primarily by lower imports from Saudi Arabia (down 160,000 bpd month-on-month) and higher exports to Asian countries such as South Korea (up 200,000 bpd month-on-month), China (up 90,000 bpd month-on-month) and India (80,000 bpd month-on-month),” Barclays bank said.
Reporting by Henning Gloystein; Editing by Joseph Radford and Tom Hogue