Oil prices hit 2019 highs amid supply cuts, trade talk hopes

There has been a surge in US crude oil by more than 2 million barrels per day (bpd) in 2018, to a record 11.9 million bpd. (Reuters)
Updated 18 February 2019

Oil prices hit 2019 highs amid supply cuts, trade talk hopes

  • Prices have been bolstered by a tightening market because of supply cuts
  • Further supporting crude prices have been US sanctions against oil exporters

SINGAPORE: Oil prices on Monday hit their highest levels since November last year, lifted by OPEC-led supply cuts, US sanctions on Iran and Venezuela, and hopes that the Sino-US trade dispute may soon end.

International Brent crude futures were at $66.66 per barrel at 0746 GMT, up 41 cents, or 0.6 percent, from their last close. Brent earlier climbed to its highest since November 2018 at $66.78 a barrel.

US West Texas Intermediate (WTI) crude oil futures were at $56.07 per barrel, up 48 cents, or 0.9 percent, from their close. WTI prices also rose to their highest since November, at $56.13 per barrel, earlier on Monday.

Prices have been bolstered by a tightening market because of supply cuts organized by the Organization of the Petroleum Exporting Countries (OPEC) and some non-affiliated producers like Russia. The group of producer countries agreed late last year to cut output by 1.2 million barrels per day (bpd) to prevent a large supply overhang from swelling.

Further supporting crude prices have been US sanctions against oil exporters and OPEC-members Iran and Venezuela.

Financial markets, including crude futures, were also generally supported by hopes that the United States and China would soon resolve their trade disputes, which have dragged on global economic growth.

“OPEC production cuts and US sanctions on both Iran and Venezuela are limiting supply. Trade tensions which have weighed on global growth are showing signs of easing boosting sentiment across markets and lifting oil demand prospects,” said Jasper Lawler, head of research at futures brokerage London Capital Group.

Earlier in the trading day, news of a fall in Chinese car sales in January had raised concerns about how fuel demand in the world’s second-largest oil user might fare.

China’s vehicle sales last month fell by 15.8 percent versus the same month in 2018, an industry association said on Monday. This continued the 2018 trend, in which China recorded the first annual drop in vehicle sales on record.

So-called new energy vehicle sales in January, which include electric vehicles, registered a 140 percent increase, underlining expectations that oil demand from cars may peak in China in the coming years.

Looming over oil markets in the near term, meanwhile, is the rise in US crude oil production of more than 2 million bpd in 2018, to a record 11.9 million bpd — with signs that US output will rise further.

US energy firms last week increased the number of oil rigs looking for new supply by three, to a total of 857, energy services firm Baker Hughes said in a weekly report last Friday.

That means the US rig count is higher than a year ago when fewer than 800 rigs were active.


UK economy shrinks by 2.6% in November, first drop since April

Updated 15 January 2021

UK economy shrinks by 2.6% in November, first drop since April

  • The fall in gross domestic product much lower than the average forecast for a 5.7 percent drop

LONDON: Britain’s economy shrank by 2.6 percent in November, the first monthly fall in output since the depths of an initial COVID lockdown in April, as new restrictions were imposed on much of the country to slow the spread of the disease.
The fall in gross domestic product reported by the Office for National Statistics was much lower than the average forecast for a 5.7 percent drop in a Reuters poll of economists.
The Bank of England estimates Britain’s economy shrank by just over 1 percent over the final three months of 2020, and with a new lockdown in place since January the country is likely to have fallen into a double-dip recession.
The BoE ramped up its bond-buying program to almost 900 billion pounds in November and Governor Andrew Bailey said this week that it was too soon to say if further stimulus would be needed.