Updated May 18, 2018, 10:24 PM
SINGAPORE (Reuters) – Oil prices
held firm on Friday on strong demand, ongoing supply cuts led by producer
cartel OPEC, and looming US sanctions against major crude exporter Iran.
But markets remained below
multi-year highs from the previous day as surging output from the United States
is expected to offset at least some of the shortfalls.
Brent crude futures were at $79.55
per barrel at 0651 GMT, up 25 cents, or 0.3 percent, from their last close.
Brent broke through $80 for the first time since November 2014 on Thursday.
US West Texas Intermediate (WTI)
crude futures were at $71.65 a barrel, up 16 cents, or 0.2 percent, from their
last settlement.
Crude prices have received broad
support from voluntary supply cuts led by the Organization of the Petroleum
Exporting Countries (OPEC) aimed at tightening the market.
“Global inventories are approaching
long-run averages, suggesting that the coordinated OPEC/non-OPEC supply cuts
have been successful,” said Jack Allardyce, oil and gas research analyst at
Cantor Fitzgerald.
Beyond OPEC’s cuts, strong demand as
well as falling output from Venezuela and a US announcement earlier this month
to renew sanctions against OPEC-member Iran helped push up Brent by 20 percent
since the start of the year.
US investment bank Jefferies said
sanctions against Iran could remove more than 1 million barrels per day (bpd)
from the market.
Britain’s Barclays bank said on
Friday that it expected average prices of $70 per barrel Brent for this year
and of $65 a barrel for 2019, up from estimates of $63 and $60 per barrel
previously.
With crude prices at levels not seen
since late 2014, Allardyce warned the high fuel costs could start crimping
consumption.
At $80 per barrel, Asia’s thirst for
oil costs the region a whopping $1 trillion a year, more than twice what it was
in 2015/2016, the two years prior to the OPEC-cuts which started in 2017.
“Higher oil prices due to tighter
physical markets and geopolitical tensions could weigh significantly on the
macro outlook for emerging market Asia countries,” Barclays said.
The crude forward curve is in firm
backwardation, a structure that suggests a tight market as prices for immediate
delivery are higher than those for later dispatch.
Front-month Brent prices are now
almost $2.60 per barrel more expensive than those for delivery in December.
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