Oil eases from 4-month high on global growth worries

Mae Love
March 22, 2019

Oil hovered slightly below 2019 peaks on Friday, propped up by ongoing supply cuts led by producer club OPEC and by USA sanctions on Iran and Venezuela, Trend reports citing Reuters.

Crude oil prices extended losses early Friday as they fell for a second day following year-to-date highs on Wednesday, with investors weighing the impact of a potential economic slowdown on future demand.

Brent crude, the global benchmark, rose 0.6% to $68 a barrel, which is its highest price level in four months.

U.S. West Texas Intermediate (WTI) futures were at $60 per barrel, virtually unchanged from their last settlement and not far off their 2019 peak of $60.39 touched on Thursday.

The price spike was helped along by the federal Energy Information Administration (EIA) announcing that USA commercial crude oil inventories plunged by 9.6 million barrels last week.

Meanwhile, more active second-month WTI benchmark added 1.6 percent to $60.23 per barrel, while the United Kingdom crude cruises over 1.6 percent to close the day at $68.50 per barrel.

"Global economic growth still remains a concern", said the director of energy consultancy Trifecta.

Economic growth has slowed across Asia, Europe and North America, potentially denting fuel consumption.

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Crude prices have been pushed up by nearly a third since the start of 2019 by supply cuts led by the Organisation of the Petroleum Exporting Countries (OPEC) as well as sanctions against Iran and Venezuela by the United States.

At the time, oil industry analysts estimated the production cut announced by OPEC+ would likely be enough to balance the market in the first half of 2019, and prevent inventories from stockpiling and causing an unreasonable glut.

This is partly due to major U.S. sanctions recently placed on Iran and Venezuela, which further signal renewed need to expand output cuts through the rest of the year.

In January and February this year, Iranian crude oil exports were higher than expected, as several of Iran's customers were using up their US sanction waivers to continue importing Iranian oil, according to industry sources and shipping data, quoted by Reuters 10 days before the end of February. He went on to state that the United States is "committed to bringing Iranian crude oil exports to zero as quickly as market conditions will permit", adding, "We need to roll up our sleeves and compete-by facilitating investment, encouraging partners to buy from us, and by punishing bad actors".

Venezuelan oil production has also dwindled amid USA sanctions and an internal political and economic crisis, plunging from a high of more than 3 million bpd at the start of the century to just 1 million bpd.

Soaring U.S. output has resulted in increasing exports, which have doubled over the past year to more than 3 million bpd.

"We do expect less Iranian oil exports after May", said Sara Vakhshouri of energy consultant SVB Energy International.

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