Crude oil on the way to its highest levels of the year
Crude oil futures climbed for a second session on Tuesday, with prices teasing their highest settlements in the year amid a tightening of supply from Venezuela and signs that OPEC will continue to cut production in the second half of the year.
The profits for the commodity come a day after their biggest settlement so far in March, finding support following reports that Saudi Arabia planned to extend efforts to reduce crude exports.
“Crude prices rallied on prospects of continued supply cuts” by the Organization of the Petroleum Exporting Countries and its allies, and amid “geopolitical tensions flaring in Venezuela and Iran,” analysts at ICICI Bank wrote in a Tuesday note. “Offsetting these developments is the surge in U.S. supply, which the International Energy Agency said would continue to 2024, probably requiring OPEC and its allies to keep up their policy of market management.”
April West Texas Intermediate crude CLJ9, +0.51% rose 72 cents, or 1.3%, to $57.51 a barrel on the New York Mercantile Exchange on Tuesday, which put prices for the front-month contract on track for the highest close since November.
Global benchmark May Brent crude LCOK9, +0.30% gained 54 cents, or 0.8%, to $67.12 a barrel on ICE Futures Europe. A finish above $67.08 may be the highest since November.
“A power blackout has stalled oil shipments from crisis-stricken Venezuela amid economic and political turmoil. “Venezuela’s oil exports are under pressure in any case due to the U.S. sanctions against the state oil company PDVSA,” said Commerzbank in a Tuesday note.
Venezuela is home to the largest proven oil reserves in the world. However, annual figures from the International Energy Agency show that the country’s crude output is expected to drop from 1.3 million barrels per day in 2018 to 750,000 barrels per day in 2019 while US sanctions against Venezuela remain in place.
On Monday, oil futures gathered after Saudi Energy Minister Khalid al-Falih told Reuters that it would be too soon to change the production curb pact negotiated by OPEC and its allies, including Russia, another big producer before June.
The OPEC/non-OPEC Joint Ministerial Monitoring Committee, or JMMC, which monitors compliance with output reductions, is scheduled to meet in Azerbaijan on March 18. OPEC’s next scheduled meeting will be held on April 17-18.
A monthly oil report from the Energy Information Administration will be released later on Tuesday. Monthly reports are also due by OPEC on Thursday and IEA on Friday.
In addition, the EIA will issue its weekly petroleum supply data early on Wednesday. Analysts surveyed by S&P Platts expect the report to show, on average increase of 3.3 million cubic feet in crude oil stocks for the week finishing March 8. They also forecast a drop in supplies of 3.5 million barrels for gasoline and 2.5 million barrels for distillates that include heating oil.
On Nymex Tuesday, April gasoline RBJ9, -0.45% traded at $1.829 a gallon, up 0.2%, while April heating oil HOJ9, -0.43% rose 0.3% to $1.999 a gallon. April natural gas NGJ19, +0.04% shed less than 0.1% to $2.77 per million British thermal units.