Brent crude hits 2019-high amid OPEC supply cuts

Roman Schwartz
March 18, 2019

The Organisation of the Petroleum Exporting Countries (OPEC) and non-affiliated allies like Russian Federation - known as the OPEC+ alliance - have been withholding around 1.2 million barrels per day (bpd) in crude supply from the start of the year to tighten markets and prop up prices.

The cost of the futures contracts of Brent crude oil for May 2019 delivery gained 0.71% amounting to $68.03 per barrel on London's ICE as of 11:10 a.m. Moscow time today, according to the trading data.

Moreover, US crude oil production fell modestly for the week ended March 8.

OPEC sources have said an extension of the pact is the likely scenario. "Even as Opec+ will probably send a message on output curbs at the ministerial meeting, they may not make a decision on it in April but June".

The Organisation of Petroleum Exporting Countries reduced production by 221,000 bpd in February, a more modest reduction than in prior months.

OPEC kept its world crude oil demand projections unchanged, stressing supply is increasing at a faster pace.

Production cutbacks by OPEC nations are building a supply cushion that could be called upon to mitigate a possible supply shock from an abrupt drop in crisis-hit Venezuela's output, the IEA said Friday.

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The WTI Crude Oil market had a choppy session on Thursday, as we have broken above the 200 day EMA.

OPEC's bearish demand outlook was offset by its apparent resolve to extend crude output cuts, agreed to by its members and allied producers, which have helped oil prices rise more than 20 percent this year.

In a monthly report, the Organization of the Petroleum Exporting Countries said 2019 demand for its crude would average 30.46 million barrels per day, 130,000 bpd less than forecast last month and below what it is now producing.

Oil price gains have been limited by concerns that an economic slowdown that has gripped large parts of Asia and Europe will dent growth in fuel demand.

But oil demand has held up well so far.

OPEC agreed on December 7, led by Saudi Arabia's requests to cut output to prop up prices, to reduce output by 800,000 barrels per day, to be matched by another 400,000 barrels-per-day production cut by some non-OPEC nations led by Russian Federation, starting January 1.

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