Oil steady amid tightening supply, but capped by economic slowdown

Oil steady amid tightening supply, but capped by economic slowdown

Brent crude futures, the worldwide benchmark for oil prices, were up $1.04, or 1.5%, at $71.65 per barrel around 2:30 p.m., after hitting a five-month high.

Last December, OPEC and other major oil producers, including Russian Federation, pledged to cut production by 1.2 million barrels per day in order to prop up prices, effective from this January.

Global benchmark Brent futures hit their strongest level since last November at $71.34 per barrel, before easing to $71.18 per barrel.

Crude oil futures for May ended up $63, or 0.98%, at $64.61 a barrel.

THE price of Bonny Light, Nigeria's premium oil grade has risen from $70 to $71.74 per barrel in the global market, the highest in 2019, as the Organisation of Petroleum Exporting Countries, OPEC, continue to eliminate excess supply from the volatile market.

A latest report by global wealth management and investment banking company Stifel said that the crude oil market will likely be undersupplied in the second half of this year, creating opportunities for investors.

OPEC's oil output dropped sharply last month as a result of steep production cuts in Venezuela and kingpin Saudi Arabia, the cartel said on Wednesday.

"Declines from these two exempt countries account for nearly 47% of the reduction seen from OPEC", ING added.

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The U.S. sanctions on Iran and Venezuela also caused supply declines in these countries, which are forecast to see their outputs decrease further.

Despite the OPEC-led cuts, not all regions are in tight supply.

In the United States, crude oil production has risen by more than 2 million bpd since early 2018, to a record 12.2 million bpd, with many analysts expecting output to exceed 13 million bpd soon.

The report said US crude stockpiles rose to their highest level since November 2017, amid rising imports.

"With the new Permian pipelines (from July), we can see a boost of 500,000 to 600,000 bpd in USA exports, " said energy consultancy, FGE in a note.

"Brent crude passed the US$70 a barrel mark for the first time in months a few days ago and now, thanks to the new from Libya, it has continued rising".

In its third downgrade since October, the International Monetary Fund said the global economy will likely grow 3.3 percent this year, the slowest expansion since 2016.

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