Oil prices extend losses after reaching year-to-date high

Darnell Taylor
March 22, 2019

Oil prices on Friday hovered close to 2019 peaks reached the previous day, propped up by supply cuts led by producer club OPEC and by US sanctions against Iran and Venezuela.

But oil prices plunged more than 3 percent on Monday after, saying the the cost of crude is rising too much and urging the group to "please relax and take it easy".

Total products supplied over the last four-week period averaged 21.1 million barrels per day, up by 2.8 percent from the same period past year.

U.S. West Texas Intermediate (WTI) futures were at $60.04 per barrel, up 5 cents from their last settlement. WTI also hit a 2019 peak at $60.39 the preceding day.

"The price action suggests investor uncertainty over domestic and global economic growth on future demand".

While tracking Iran's oil exports has become an increasingly hard task after the USA sanctions returned in early November, some of the key Iranian oil customers that received US waivers resumed Iranian oil purchases in 2019 or increased imports to their respective ceiling allowed under the waivers, after an initial "wait-and-see mode" for November and December purchases amid uncertainties who is getting waivers.

Meanwhile, U.S. gasoline stocks fell by by 1.9 million barrels, while inventories of distillate fuels like diesel ticked down by about 300,000 barrels.

Traders said oil prices remained firm on OPEC's supply cuts, USA sanctions against Venezuela coupled with healthy domestic demand.

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On Monday, OPEC said it will decide whether to extend output cuts in June, once the market has assessed the impact of United States sanctions on Iran and the crisis in Venezuela.

Iranian oil exports have also slumped.

Brent for May delivery added 28 cents to $67.89 on the London-based ICE Futures Europe exchange.

"The report is bullish due to the large crude oil inventory drawdown, which was a function of low import levels and high export volumes", said John Kilduff, a partner at Again Capital LLC in NY.

OPEC and its allies are succeeding in driving the price of crude oil upwards to levels not seen since November 2018 by sticking together to maintain massive production cuts.

Putting a break on further price increases has been a US crude oil production C-OUT-T-EIA jump of more than 2 million bpd since early 2018 to a record 12.1 million bpd, making the United States the world's biggest producer ahead of Russian Federation and Saudi Arabia.

Much of the increase in recent weeks has been influenced by concern about potentially lost Venezuelan output, as well as indications that the world economy may slow and affect demand. -China trade war dragged on, pulling down a global economy that is already on a downward path, a Thomson Reuters/INSEAD survey found.

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