Oil prices slid away from 2019 highs on Wednesday, with surging U.S. supply and slowing financial development tempering rising pressure from supply cuts led by manufacturer club OPEC and from Washington’s sanctions on Iran and Venezuela.
U.S. West Texas Intermediate (WTI) crude oil futures hit 2019 highs of $56.39 per barrel but slid back to $56.15 per barrel, which was marginally exceeding their last settlement.
International Brent crude futures were at $66.33 per barrel, down 12 cents, or 0.2 percent, from their previous close, however, still not far off their 2019 high of $66.83 per barrel from Monday.
Oil prices have been reinforced by supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC).
OPEC-member and topmost crude exporter Saudi Arabia anticipated decreasing consignments of light crude oil to Asia in March as part of the effort to tighten markets.
OPEC as well as some non-associated manufacturers such as Russia agreed late last year to cut yield by 1.2 million barrels per day (bpd) to stop a large supply extension from inflammation.
“We have lowered Saudi crude oil output in line with announcements … (and) are now assuming that Saudi Arabia will produce in the first three quarters of 2019 less than the 10.31 million bpd target it agreed to at the Dec. 7 OPEC, non-OPEC meeting,” French bank BNP Paribas said in a note.
Due to the cuts, BNP said it anticipated oil prices “to rally through Q3 2019”, with Brent to average $73 per barrel by then and WTI to average $66.
Another important oil price driver has been U.S. sanctions oil exporters Iran and Venezuela.
In spite of the sanctions, Iran’s crude exports were higher than anticipated in January, averaging about 1.25 million bpd, according to Refinitiv ship tracking information. A lot of analysts had anticipated Iran oil exports to fall less 1 million bpd after the imposition of U.S. sanctions last November.
Standing versus the supply cuts and sanctions is U.S. crude yield, which increased by more than 2 million bpd in 2018 to a record 11.9 million bpd, because of flourishing shale oil manufacture, which the Energy Information Administration said was anticipated to keep increasing.
BNP Paribas said surging U.S. yield would feed into lower oil prices toward the end of the year, with Brent to slope to an average of $67 a barrel by the fourth quarter and WTI to average $61.
“U.S. oil production growth, driven by shale, will be increasingly exported in greater volumes to international markets while the global economy is expected to witness a synchronized slowdown in growth,” the bank said.
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