By Bloomberg News - April 3, 2019
Oil added to its biggest advance in
more than two weeks after fresh evidence of the Organization of the Petroleum
Exporting Countries and its allies (Opec+) coalition’s resolve to cut output
and a deepening crisis in Venezuela supported a bullish outlook for prices.
Futures in New York rose as much as
0.7 percent after jumping 2.4 percent in the previous session. Opec crude
production fell for a fourth month in March, data showed Monday. Power
blackouts in Venezuela further squeezed supplies, while US stockpiles probably
declined by 900,000 barrels last week, according to a Bloomberg survey before
the official figures due on Wednesday.
Oil has rallied around 36 percent
this year due to the effectiveness of the Saudi Arabian-led production cuts, as
well as recent signs the global growth outlook may not be as bad as previously
feared. The output reductions, which are set to expire in June, could be easily
extended, Iranian Oil Minister Bijan Namdar Zanganeh said Monday in Moscow
after meeting his Russian counterpart.
“Saudi Arabia walked the talk and
cut their supplies every month, so there was pressure on every other country to
comply,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. (OCBC)
in Singapore. Whether the Opec+ extend the reductions, and the upcoming
decision on the Iran waivers will be key price drivers, he said.
West Texas Intermediate for May
delivery rose 16 cents to $61.75 a barrel on the New York Mercantile Exchange
as of 2:30 p.m. in Singapore. It climbed as much as 43 cents earlier and peaked
at $62.02, the highest intraday price since November 8.
Brent for June settlement increased
15 cents to $69.16 a barrel on the London-based ICE Futures Europe exchange.
The global benchmark crude’s premium over WTI for the same month narrowed to
$7.30 a barrel.
The 14 Opec members pumped 295,000
barrels less of oil a day in March than in February, restricting total output
to 30.385 million barrels. Saudi Arabia cut production to a four-year low of
9.82 million barrels a day, according to a Bloomberg survey of officials,
analysts and ship-tracking data.
There may be a “sentiment-driven”
rally if the output cuts are extended, but compliance could weaken, said OCBC’s
Lee. “There’s a very strong incentive for them to not comply” when prices are
at around $62 a barrel, he said.
Venezuelan production slumped to
600,000 barrels a day last month, from around 1 million in February, as power
blackouts forced the key oil port of Jose to close for nearly eight days. The
threat of additional US sanctions is also hanging over Iranian supply, while
the White House is set to decide by early May if waivers allowing some
countries to keep buying oil from the Persian Gulf nation will be extended or
not.
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