Oil prices climb to 2019 high

OPEC and its allies started voluntary production cuts last month, aiming to tighten the market. Above, flames emerge from flare stacks at oil fields in Kirkuk, Iraq. (Reuters)

• Leading exporter and de facto OPEC leader Saudi Arabia said on Tuesday it would cut more than half a million barrels per day (bpd) more in March
• Bank of America Merrill Lynch: Brent should average $70 per barrel in 2019, helped by voluntary (Saudi, Kuwait, UAE) and involuntary (Venezuela, Iran) declines in OPEC supply

LONDON: Brent crude oil climbed above $65 a barrel to its highest this year as OPEC-led supply cuts and this week’s announcement of a higher-than-expected cut by Saudi Arabia encouraged investors.
The international oil benchmark reached $65.20 late on Friday, the 63 cent gain equating to a rise of about 1 percent. Brent approached near three-month highs and was set for a gain of nearly 5 percent on the week.
US West Texas Intermediate crude futures were also up about 1 percent, rising 53 cents to $54.94.
The Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia started voluntary production cuts last month, aiming to tighten the market.
Leading exporter and de facto OPEC leader Saudi Arabia said on Tuesday it would cut more than half a million barrels per day (bpd) more in March than the deal called for, sending prices surging.
Prices were also buoyed by reports of a partial closure of Saudi Arabia’s Safaniya, its largest offshore oilfield with production capacity of more than 1 million bpd. The shutdown occurred about two weeks ago, a source said.
State oil giant Saudi Aramco said in a statement to Reuters that all of its facilities and operations — including Safaniyah — are safe and normal.
“Brent should average $70 per barrel in 2019, helped by voluntary (Saudi, Kuwait, UAE) and involuntary (Venezuela, Iran) declines in OPEC supply,” Bank of America Merrill Lynch said.
The bank said it expects a drop of 2.5 million bpd in OPEC supply in the fourth quarter of 2019 from a year earlier.
However, the global supply picture remains uncertain.
US oil production is on the rise, while the seizure of Libya’s main oilfield by Eastern armed forces this week could soon lead to its reopening.
But US sanctions on Venezuela and Iran have have helped to tighten global supply and security threats could threaten Nigerian production after general elections this weekend.
“Looking ahead, the prognosis for Venezuela and Iran remains skewed to the downside. As such, they should continue to act as important pillars of price support. The same, however, can’t be said for Libya,” said Stephen Brennock, of oil broker PVM.
“This risks throwing a spanner in the works for OPEC’s rebalancing ambitions and, therefore, the price recovery.”
Faltering global economic growth is also a concern, with signs of a slowdown now abundant in Europe, Asia and the US, which could lead to slowing growth in fuel demand.