Oil prices rise on OPEC's supply cuts and healthy demand

Daniel Fowler
March 15, 2019

Crude stocks at the Cushing, Oklahoma, delivery hub fell 672,000 barrels, their first drawdown in a month, the EIA said.

Brent crude futures were at $66.76 per barrel, up 18 cents, or 0.3 percent.

The so-called OPEC+ alliance, including Russian Federation and other producers, agreed in December to reduce supply by 1.2 million bpd from 1 January for six months, which will help to boost oil prices after last year's downward trend. The EIA forecasts 2019 USA crude production of 12.3 million barrels a day, down 0.9% from the February forecast.

Prices continue to be supported by the on-going supply cuts from OPEC and its allies as well as the USA sanctions against Iran and Venezuela.

Venezuela's worst blackout on record has left most of the country without power for six days, with hospitals struggling to keep equipment running, food rotting in the tropical heat and exports from the main oil terminal stranded.

"Failures in the electrical system".

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India imports four out of every five barrels of oil it consumes.

The API also reported a huge draw in gasoline inventories of 5.8 million barrels for the week-ending March 8.

The Kingdom will supply overseas customers with less than seven million barrels a day, 635,000 barrels less than refiners asked for. Distillate inventories also increased by 195,000 barrels, compared to an expected draw of 1.858 million barrels for the week.

Crude oil prices are higher, helped by a us government forecast showing slower than expected USA production, as drillers scale back in smaller shale plays and the Gulf of Mexico; WTI +1.7% to $57.85/bbl, Brent +0.8% to $67.23/bbl. Traders are looking for a 2.7 million barrel build, but expectations could change to reflect the API data as we approach the regular session opening and report time.

The slowdown in drilling points to more timid output growth going forward, but because the overall drilling level remains relatively high despite the recent decline, many analysts still expect USA crude output to rise above 13 million bpd soon.

Despite the gains, commodities markets were somewhat held back after US employment data raised concerns that an economic slowdown in Asia and Europe was spilling into the United States, where growth has so far still been healthy.

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