Oil Hits 2019 High Amid Supply Cuts

Roman Schwartz
March 15, 2019

Several factors contributed to the idea of a tightening market, including the Energy Information Administration reporting on Wednesday that USA crude inventories fell by 3.9 million barrels last week.

Product inventories also declined, with those gasoline down by 4.6m barrels, together with a 1.2m barrel drop in those of propane/propylene.

International Brent crude oil futures were at $67.37 US a barrel, up 70 cents, or 1.1%, from their last close. Saudi Arabia plans to cut its crude oil exports in April to below 7 million barrels per day (bpd), while keeping its output well below 10 million bpd, a Saudi official said on Monday, as the kingdom seeks to drain a supply glut and support oil prices.

USA crude oil production also dipped, falling by 100,000 barrels per day (bpd) to 12 million bpd.

"Crude oil continues to grind higher.in response to ongoing production cuts from the OPEC+ group of producers as well as another (output) slump from a blacked-out Venezuela", said Ole Hansen, head of commodity strategy at Denmark's Saxo Bank.

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While Saudi Arabia kept production even lower than required by the deal, the largest drop from January's rate occurred in Venezuela, whose exports have been disrupted by USA sanctions.

The report said rising production outside the group pressed the need for continued supply restraint by OPEC+. A recent EIA forecast also showed that the United States would become a net exporter of crude oil and petroleum products on a monthly basis in 2019 and on an annual basis in 2020. United States crude oil demand in 2019 is expected to rise by 360,000 barrels to 20.81 million barrels per day, a former Energy Information Administration (EIA) for an increase of 350,000 barrels per day.

Crude inventories fell by 3.9 million barrels in the last week, compared with analysts' expectations for an increase of 2.7 million barrels.

Raw stocks at the Kacheng delivery office in Oklahoma fell by 1.1 million barrels, the institute said.

In the Middle East, the United States aims to cut Iran's crude exports by about 20 percent to below 1 million barrels per day (bpd) from May by requiring importing countries to reduce purchases to avoid USA sanctions, two sources familiar with the matter told Reuters. Crude oil imports to the USA fell last week by 523,000 bpd to 6.4 million bpd.

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