Brent oil briefly hits US$65 as production cuts fuel 2019 high

Crude oil storage tanks are seen from above at the Cushing oil hub, in Cushing, Oklahoma, March 24, 2016. (Reuters pic)

LONDON: Brent crude oil briefly reached 2019 highs above US$65 per barrel on Friday, as OPEC-led supply cuts and the announcement of a higher-than-expected cut by Saudi Arabia this week encouraged investors.

The international benchmark for oil prices rose as high as $65.10, pushing past US$65 for the first time this year. It fell back to US$64.75 by 0850 GMT, up 18 cents or 0.28% from the last close.

Brent is near a three-month high and set for a more than 1% gain on the week.

US West Texas Intermediate crude futures were at US$54.50 per barrel, up 9 cents from their last settlement.

The Organisation of the Petroleum Exporting Countries along with allies led by Russia made voluntary production cuts beginning last month aimed at tightening the market.

Top exporter and de facto Opec leader Saudi Arabia said on Tuesday it would cut over half a million barrels per day (bpd) more in March than the deal called for, sending prices surging.

Prices were also buoyed by the partial closure of Saudi Arabia’s Safaniya, its largest offshore oilfield with a production capacity of more than 1 million bpd.

The shutdown occurred about two weeks ago, a source said, and it was not immediately clear when the field would return to full capacity.

“Brent should average US$70 per barrel in 2019, helped by voluntary (Saudi, Kuwait, UAE) and involuntary (Venezuela, Iran) declines in Opec supply,” Bank of America Merrill Lynch said in a note.

It also said it expected a drop of 2.5 million bpd in OPEC supply in the fourth quarter of 2019 compared to a year earlier.

But faltering economic growth is also a concern, with signs of a slowdown now abundant in Europe, Asia and the United States.

“Our macroeconomic view remains firmly bearish,” commodities brokerage Marex Spectron said.

Surging US output may also undermine OPEC’s efforts to tighten the market.

US crude production rose by more than 2 million bpd last year, to 11.9 million bpd, making the United States the world’s biggest oil producer.

Most analysts expect US output to rise past 12 million bpd soon, and perhaps even hit 13 million bpd by the end of the year.