SINGAPORE: Oil prices were around 2019 highs on Wednesday, propped up by supply cuts led by producer club OPEC and by U.S. sanctions on Iran and Venezuela.
But soaring U.S. production and expectations of an economic slowdown look set to cap prices, analysts said.
U.S. West Texas Intermediate (WTI) crude oil futures hit 2019 highs of $56.39 per barrel shortly after 0300 GMT on Wednesday, up 30 cents, or 0.5 percent, from their last settlement.
International Brent crude futures were at $66.58 per barrel, up 13 cents, or 0.2 percent, from their last close and not far off their 2019 high of $66.83 per barrel from Monday.
Oil prices have been supported by supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC).
OPEC-member and top crude exporter Saudi Arabia is expected to reduce shipments of light crude oil to Asia in March as part of the effort to tighten markets.
OPEC as well as some non-affiliated producers such as Russia agreed late last year to cut output by 1.2 million barrels per day (bpd) to prevent a large supply overhang from swelling.
“We have lowered Saudi crude oil output in line with announcements … (and) are now assuming that Saudi Arabia will produce in the first three quarters of 2019 less than the 10.31 million bpd target it agreed to at the Dec. 7 OPEC, non-OPEC meeting,” French bank BNP Paribas said in a note.
Because of the cuts, BNP said it expected oil prices “to rally through Q3 2019”, with Brent to average $73 per barrel by then and WTI to average $66.
Another key oil price driver has been U.S. sanctions on oil exporters Iran and Venezuela.
Despite the sanctions, Iran’s crude exports were higher than expected in January, averaging around 1.25 million bpd, according to Refinitiv ship tracking data. Many analysts had expected Iran oil exports to drop below 1 million bpd after the imposition of U.S. sanctions last November.
SHALE BOOM, WEAKER ECONOMY
Standing against the supply cuts and sanctions is U.S. crude output , which soared by more than 2 million bpd in 2018 to a record 11.9 million bpd, thanks to booming shale oil production, which the Energy Information Administration on Tuesday said was expected to keep rising.
BNP Paribas said surging U.S. output would feed into lower oil prices towards the end of the year, with Brent to dip to an average of $67 a barrel by the fourth quarter and WTI to average $61.
“U.S. oil production growth, driven by shale, will be increasingly exported in greater volumes to international markets while the global economy is expected to witness a synchronised slowdown in growth,” the bank said.
KUALA LUMPUR: Malaysian palm oil prices are set to hold steady in 2019 at an average of RM2,303 a tonne, according to estimates by the Malaysian Palm Oil Council (MPOC), while global output of the tropical oil is expected to rise by 3 million tonnes.
“Global palm oil production is projected to be 72 million tonnes, with Malaysia and Indonesia as leading producers,“ the MPOC said in an online conference presentation today.
Rising production could cap recent price gains for palm oil, which has been recovering after touching a 3-year low last November at RM1,940 a tonne.
Benchmark palm oil was trading at RM2,281 a tonne today. The tropical oil averaged RM2,308 last year, according to Refinitiv Eikon data.
MPOC, Malaysia’s key marketing agency for palm oil, also estimated that Malaysian output would rise to 20.2 million tonnes in 2019 and pegged Indonesian production at 42.8 million tonnes.
Malaysia produced 19.5 million tonnes of palm oil last year, while Indonesia’s 2018 output stood at 42 million tonnes, based on estimates by the Indonesia Palm Oil Association.
Malaysian palm oil output is expected to rise as newly replanted areas start to mature, but the increase will be marginal due to ageing trees and a possible El Nino in 2019 that will curb production, the MPOC said in its presentation.
“Indonesian production is forecast to reach a record high of 42.8 million tonnes in 2019 due to improving weather conditions as well as newly maturing areas,“ it added.
Palm oil exports in 2019 are also expected to increase in 2019, in line with an expected rise in demand from key importer India due to its declining domestic oilseed production.
“India is expected to increase its (vegetable oil) imports by 500,000 tonnes, reaching 15.15 million tonnes, out of which palm oil will account about 10 million tonnes,“ said the MPOC presentation.
Industry regulator the Malaysian Palm Oil Board forecast Malaysia’s a slight rise in production to 20.3 million tonnes this year due to favourable weather conditions and an expansion in oil palm matured area, according to an online presentation.
It estimated Malaysia’s 2019 exports at 17.2 million tonnes, up from 16.5 million tonnes last year, due to “expected stronger palm oil demand from major markets.”
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SINGAPORE, Jan 30 (Reuters): Oil prices rose on Wednesday as concerns about supply disruptions following U.S. sanctions on Venezuela’s oil industry outweighed downward pressure from a darkening outlook for the global economy.
U.S. West Texas Intermediate (WTI) crude futures were at $53.54 per barrel at 0455 GMT, up 23 cents, or 0.4 percent, above their last settlement.
International Brent crude oil futures rose 37 cents, or 0.6 percent, to $61.69 per barrel.
The gains followed a 2 percent price jump in the previous session, when markets first digested the U.S. sanctions on Venezuela’s oil exports.
Washington on Monday announced export sanctions against state-owned oil firm Petroleos de Venezuela SA (PDVSA), limiting transactions between U.S. companies that do business with Venezuela through purchases of crude oil and sales of refined products.
“The sanctions so far have been mostly disruptive for refiners on the U.S. Gulf Coast, who are being forced to seek alternative heavy crude supplies, and have stepped up purchases from Canada,” said Vandana Hari of Vanda Insights, an energy consultancy.
She added, however, that Canadian oil exports would be “constrained by pipeline capacity bottlenecks.
The sanctions aim to freeze sale proceeds from PDVSA’s exports of roughly 500,000 barrels per day (bpd) of crude oil to the United States.
Although the move pushed up oil prices, markets appeared relatively relaxed as the sanctions only affect Venezuelan supply to the United States.
“The (Venezuelan) export volumes will not be eliminated from the market, but rather rerouted to other countries,” said Paola Rodriguez-Masiu, an analyst at consultancy Rystad Energy.
With the United States dropping out as a customer for Venezuelan oil, she added that “China and India … will be able to pick up these oil volumes at great discounts.”
Despite this, some analysts said that non-U.S. oil trading firms with operations in the United States may still avoid dealing with Venezuelan oil.
The Schork Report, a daily oil and gas trading publication, said on Wednesday that many “international oil traders … have significant trading operations in the U.S. … At least in the short-term, these traders will undoubtedly quit buying from Venezuela until such a time that they are assured that they are not running afoul of U.S. sanctions.”
Other analysts also pointed to economic weakness as countering supply-side efforts to tighten the market such as the voluntary supply restraint by the Organization of the Petroleum Exporting Countries (OPEC).
“Pulling in the opposite (oil price) direction are heightened concerns about global growth, particularly that of China,” said Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank.
Global economic growth and fuel consumption are expected to slow this year amid a trade dispute between the United States and China, the world’s two biggest economies.
Officials from Washington and Beijing are set to launch a new round of trade talks on Wednesday aimed at resolving their disputes amid which both sides have slapped hefty import tariffs on each other’s goods.
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