Oil prices rise as market tightens, but demand concerns linger

Darnell Taylor
April 14, 2019

Oil prices were firm on Friday, supported by ongoing supply cuts led by producer club Organisation of the Petroleum Exporting Countries (OPEC) and by United States (US) sanctions on petroleum exporters Iran and Venezuela.

"Pressure to global supplies continues to mount because of sanctions-linked problems in Iran and Venezuela and rising geopolitical risk in Libya", said Stephen Innes, head of trading at SPI Asset Management.

Production by OPEC countries in March was 2.2 million barrels per day (b/d) lower than in November and now there is uncertainty concerning Libya, said a report released by the International Energy Agency on Thursday.

OPEC revised demand growth down in 2019 to 1.21 million bpd due to "slower-than-expected economic activity". Demand for OPEC crude in 2018 averaged 31.35 million bpd.

"Oil prices at $70/bbl for Brent are less comfortable for consumers than they were at the start of the year", the reports says.

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Saudi Arabia can add more oil to the market without adjusting production quotas since the kingdom's output in March was some 500,000 bpd below its OPEC target, the source added. Moreover, news out that Russian Federation has shied away from committing to extend oil production cuts along with OPEC could also weigh adversely on crude prices if this risk materializes.

OPEC and its allies will meet in June to decide whether to continue withholding supply, and while OPEC's de-facto leader, Saudi Arabia, is seen to be keen to continue cutting, sources with the group said it may raise output from July if disruptions elsewhere continue.

Russian Federation is also ready to boost supplies.

The rig count fell for the past four months as independent exploration and production companies cut spending on new drilling to focus on earnings growth instead of increased output. The dollar index slipped to its lowest against the euro in more than two weeks, making crude cheaper for non-U.S. buyers.

Nigerian production increased by 11,000 bpd in March to 1.733 million bpd and fell by 5.000 bpd to 1.685 million bpd according to direct communication, according to the monthly oil market report for April.

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