Oil hovers near 2019 highs amid Opec cuts

An oil pump jack pumps oil in a field near Calgary, Alberta, Canada. (Reuters pic)

LONDON: Oil prices hovered around 2019 highs on Thursday, bolstered by Opec-led supply cuts and US sanctions on Venezuela and Iran, but were capped by slowing growth in the global economy.

US West Texas Intermediate (WTI) crude oil futures were at US$57.14 a barrel at 0955 GMT, 2 cents below their last settlement, and close to a 2019 high of US$57.55 reached the previous day.

Brent crude futures eased by 14 cents, or 0.2%, to US$66.94 after touching a 2019 peak on Wednesday at US$67.38.

Oil prices have been driven up this year by supply cuts led by the Organisation of the Petroleum Exporting Countries (Opec).

Opec and its de facto leader Saudi Arabia agreed late last year, along with producer allies such as Russia, to cut output by 1.2 million barrels per day (bpd) to prevent a supply overhang from growing.

OPEC member Nigeria signalled on Wednesday that it would limit output after its production climbed in January.

“There is a growing confidence that global oil inventories will start depleting soon, mainly due to falling Opec production,” said PVM Oil analyst Tamas Varga.

“This, together with unintended reductions from exempted countries, would take the combined output well below the Oct 2018 level.”

US sanctions have hit Iranian and Venezuelan crude exports while unrest has curbed Libyan output.

However, analysts said that a global economic slowdown – signs of which emerged late last year – was preventing prices from surging beyond highs reached this week.

“Slowing economic growth will invariably lead to weakness in fuel consumption, thus eroding bullish gains for oil prices,” said Benjamin Lu of brokerage Phillip Futures in Singapore.

The main factor keeping oil prices from rising even further is soaring US output, which rose by more than 2 million bpd last year to a record 11.9 million bpd.

The swelling production has resulted in rising US oil inventories.

US crude oil stocks rose by 1.3 million barrels to 448.5 million barrels in the week to Feb 15, according to a weekly report by the American Petroleum Institute on Wednesday.

Official oil inventory and production data is due from the US Energy Information Administration (EIA) after 1800 GMT on Thursday.