- The OPEC and non-affiliated allies like Russia have pledged to withhold around 1.2 million barrels per day of supply this year
- Crude has been driven up further by US sanctions against Iran and Venezuela
SINGAPORE: Oil prices rose to their highest level since November 2018 on Monday, driven upwards by OPEC’s ongoing supply cuts, US sanctions against Iran and Venezuela, and strong US jobs data.
International benchmark Brent futures were at $70.65 per barrel at 0441 GMT on Monday, up 31 cents, or 0.4 percent from their last close.
US West Texas Intermediate (WTI) crude were up 31 cents, or 0.5 percent, at $63.39 per barrel.
Brent and WTI both hit their highest since November at $70.76 and $63.48 a barrel, respectively, early on Monday.
“Brent prices increased more than 30 percent year-to-date as OPEC+ continued to cut supply for four months in a row and optimism over US-China trade talks helped to buoy the demand outlook,” US bank J.P. Morgan said in a note.
To prop up prices, the Organization of the Petroleum Exporting Countries (OPEC) and non-affiliated allies like Russia, known as OPEC+, have pledged to withhold around 1.2 million barrels per day (bpd) of supply this year.
Energy consultancy FGE said these cuts meant “excess inventories are disappearing,” adding that “the market is poised for prices to rise to $75 per barrel or higher” for Brent.
Strong US jobs data on Friday also helped lift Asian markets on Monday.
“Oil bulls are drawing heart from the strong employment data in the US,” said Sukrit Vijayakar, director of energy consultancy Trifecta.
“Military action in Libya, which could disrupt supply from the OPEC member, also aided prices,” he said.
Crude has been driven up further by US sanctions against Iran and Venezuela.
“Sanctions can cut 500,000 bpd of Venezuelan exports. Add that to a cut in Iran waivers and prices can rise substantially,” FGE said.
Despite the host of price drivers, there remain factors that could bring oil down later this year.
Russia is a reluctant participant in its agreement with OPEC to withhold output, and it may increase production if the deal is not extended before it expires on July 1, Energy Minister Alexander Novak said on Friday.
Russian oil output reached a national record high of 11.16 million bpd last year.
In the United States, crude production reached a global record 12.2 million bpd in late March.
US crude exports have also risen, breaking through 3 million bpd for the first time earlier this year.
“With the new Permian pipelines (from July), we can see a boost of 500,000 to 600,000 bpd in US exports,” FGE said.
There also remain concerns about the health of the global economy, especially should China and the United States fail to resolve their trade dispute soon.
“Global demand has weakened, and existing tariffs on Chinese goods shipments to the US are providing an additional drag,” rating agency Moody’s said on Monday, although it added that Chinese stimulus measures would likely support growth over 2019.