Oil rises on OPEC supply cuts, but surging U.S. output and economic slowdown weigh
U.S. West Texas Intermediate (WTI) crude oil futures were at $57.45 per barrel at 0116 GMT, up 23 cents, or 0.4 percent, from their last settlement.
International Brent crude futures were at $66.55 per barrel, up 24 cents, or 0.4 percent.
Traders said oil markets were currently tightening.
In Venezuela, suffering from a political and economic crisis, oil exports have plunged by 40 percent to around 920,000 barrels per day (bpd) since the U.S. government slapped sanctions against its petroleum industry on Jan. 28.
This drop comes as the Organization of the Petroleum Exporting Countries (OPEC), of which Venezuela is a member, has led efforts since the start of the year to withhold around 1.2 million bpd of supply to prop up prices.
“Global (oil) markets appear tighter than many anticipated for this time of year, but scores of unsold barrels can pile up quickly and saturate regions,” Canada’s RBC Capital Markets said in a research note on oil markets.
Despite this, there are signs that point to a more amply supplied market heading further into 2019.
The U.S. Energy Department said on Thursday that it was offering up to 6 million barrels of sweet crude oil from the national emergency reserve in a sale mandated by a law to raise funds to modernize the U.S. strategic oil reserves.
U.S. crude output has hit a record of more than 12 million bpd, pushing exports to an unprecedented 3.6 million bpd in February.
Investment bank RBC said it estimated U.S. “Houston barrels can economically move anywhere globally when priced at a discount of $1.70 per barrel relative to the waterborne Brent benchmark”.
Houston crude last traded at $6.60 a barrel over WTI, which still put it at a discount of more than $2.15 per barrel to Brent, told Reuters.
On the demand side, a Reuters poll showed this week that analysts expect global fuel demand to stutter this year, which would weigh on crude oil prices, amid a broad economic slowdown.
South Korea’s exports contracted at their steepest pace in nearly three years in February as demand form its major market China cooled further in yet another sign of faltering momentum in Asia’s fourth-largest economy.
Despite this, fuel consumption especially in Asia’s developing economies, which are key drivers of global oil demand, is so far holding up.
India’s diesel consumption, for instance, is expected to rise to a record this year amid a strong expansion of its heavy duty vehicles that drive economic growth of more than 7 percent.