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: Crude oil prices edged lower on Monday after sharp gains during the previous session but were supported by expectations of shrinking supply and signs that China-US trade tensions could ease.
International Brent crude oil futures on Monday were down 20 cents, or 0.32% at 0339 GMT to $62.54 a barrel, after closing up 3.14% in the previous session to their highest close since Nov 21.
US West Texas Intermediate (WTI) futures were at $55.13 per barrel, down 13 cents, or 0.24%, from their last settlement. WTI settled 2.73% higher in the last session at its highest close since Nov 19.
Output declines from the Organization of the Petroleum Exporting Countries (OPEC) as they make good on their pact to curb a supply overhang were compounded by falling US oil rig counts and sanctions on Venezuelan oil sales.
“While Venezuela’s output reportedly rose last month, fresh US sanctions on the country could see 0.5 to 1% of global supply curtailed,” said Vivek Dhar, commodities analyst for Commonwealth Bank of Australia in a note on Monday.
The sanctions will sharply limit oil transactions between Venezuela and other countries and are similar to those imposed on Iran last year, experts said after examining details posted by the Treasury Department.
OPEC oil supply fell in January by the largest amount in two years despite sluggish production declines from Russia, according to a Reuters survey.
However, Russian oil output in January missed the target for the output cuts, Energy Ministry data showed on Saturday. Production last month declined to 11.38 million barrels per day (bpd), but that was only down by 35,000 bpd from its October 2018 level that is the baseline for the pact.
Russian Energy Minister Alexander Novak has said the country’s overall cuts from the October baseline would total 50,000 bpd in January. Russia has pledged to reduce oil output by 230,000 bpd from October.
US energy firms last week cut the number of oil rigs operating to their lowest in eight months as some drillers followed through on plans to spend less on new wells this year.
“The collapse in oil prices late last year has resulted in more cautious spending by US oil explorers,” said Dhar.
Meanwhile, hopes for thawing China-US relations have also helped ease concerns over slowing economic growth.
“While the US and China have yet to reach a deal, markets were buoyed by reports that they have made significant progress,” ANZ Bank said in a research note.
US President Donald Trump last week said he would meet with Chinese President Xi Jinping, perhaps twice, in the coming weeks to try to seal a comprehensive trade deal with Beijing, but acknowledged it was not yet clear whether a deal could be reached. – REUTERS
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KUALA LUMPUR: Palm oil futures rose to their highest in nearly two weeks at the midday break of the first trading day of 2019, after the world’s largest edible oil importer India announced import tax cuts, amid expectations of a fall in production.
The benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange was up 1.7% at RM2,156 ringgit a tonne at the midday break.
It earlier rose as much as 1.8% to RM2,159, its strongest levels since Dec 21. Trading volumes stood at 14,848 lots of 25 tonnes each at noon today.
“Palm is higher today on India’s import tax cut and production, which is expected to be down for the whole month also,“ said a futures trader in Singapore.
Palm oil output in Malaysia, the second largest producer of the vegetable oil, seasonally declines in the first few months of the year after peaking in the previous quarter. November production had slid 6.09% from the previous month to 1.85 million tonnes, according to industry regulator data.
India said late on Monday it would lower the duty on crude palm oil imports to 40% from 44%, while a tax on refined oils was cut to 50% from 54%.
Malaysian shipments of refined palm oil, however, will be taxed at 45% compared with 54% earlier.
Despite the tax cuts, traders expect market gains to be short-lived as palm inventory levels in Southeast Asia remain high. – Reuters