Oil prices slip on economic worries, surging U.S. crude supply

Mae Love
April 11, 2019

Prices were also boosted by US sanctions on oil exporters Iran and Venezuela, as well as supply cuts by the OPEC and allies including Russian Federation, a group known as OPEC+.

The fly in the ointment is concern that global demand for oil could weaken if the world economy slows, as it seems to be doing.

Citing that a Libya tension is fanning the flames of investors' optimism, an oil price analyst, Tamas Varga of PVM said, "Libya's oil production and exports have not been jeopardized but the rise in tension is enough to send oil prices higher".

This, analysts say, is a result of the kingdom's determination to support oil prices in line with a production cut deal between OPEC countries and non-member Russian Federation that is to run until June.

As a result, the 11 OPEC members required to cut output achieved 155 percent compliance in March with pledged curbs, according to a Reuters calculation, up from February.

An OPEC monthly report released on Wednesday showed that Venezuela's oil output sank last month to a long-term low below 1 million barrels per day, due to US sanctions and blackouts. "Even though the crude oil inventory rise was almost equal in size, the focus of the complex, as we head into peak summer driving season, is gasoline".

"We expect the drivers of this deficit to persist through 2Q19" due to a "shock and awe implementation of the OPEC cuts, further tightening of United States oil sanctions and an only moderate increase in shale production for now", the United States bank said in a note.

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Additionally, OPEC slashed its forecast for 2019 global oil demand growth to 1.21 million bpd from 1.24 bpd, pointing out economic slowdown as the primary reason behind that decision. Demand for OPEC crude in 2018 averaged 31.35 million bpd.

Tightening global oil supplies also kept a lid on further price losses.

Meanwhile, close market watchers have predicted that oil price would continue to leap in the coming weeks, mainly because of crises in major oil and gas producing nations, especially because of crises in some oil producing nations, especially Libya, Venezuela and Iran.

Iraq's production fell marginally to 4.52 million bpd in March, slightly above its quota of 4.51 million bpd, according to OPEC secondary sources.

Even so, the report indicates there will be a small 2019 deficit if OPEC keeps pumping at March's rate of just over 30 million bpd and other things remain equal.

In Iran, hit by U.S. sanctions, output was slight down, falling 28,000 bpd to 2.70 million bpd in March.

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