Oil rises to one-week high on tighter Venezuelan, Saudi supplies

Oil rises to one-week high on tighter Venezuelan, Saudi supplies
Oil rose to the highest in more than a week after Saudi Arabia was said to plan extending deep supply curbs and a blackout across Venezuela sparked a nationwide production collapse.

Futures climbed as much as 1.2 per cent in New York to the highest since March 1. A Saudi official said the world’s top crude exporter plans to pump well below 10 million barrels a day in April, stretching deeper-than-agreed cuts into a second month. Meanwhile, fellow OPEC member Venezuela has seen output sink as power outages shut down wells, according to a senior Oil Ministry official.

Crude has stayed above $55 (U.S.) a barrel since mid-February as the Organization of Petroleum Exporting Countries and its allies agreed to cap supply to ease a supply glut and Venezuelan output slides.  (JIM WILSON / The New York Times file photo)

Crude has stayed above $55 (U.S.) a barrel since mid-February as the Organization of Petroleum Exporting Countries and its allies cap supply and Venezuelan output slides amid U.S. sanctions. Still, worries persist over booming U.S. shale production, with the International Energy Agency estimating America will account for 70 per cent of growth in global oil-supply capacity through 2024.

“Venezuela’s oil exports are under pressure,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt. In addition, “oil prices are continuing to receive tailwinds from yesterday’s announcement by Saudi Arabia that it will significantly restrict oil supply in April. This shows Saudi Arabia’s resolve to keep the oil market balanced.”

West Texas Intermediate for April delivery rose as much as 67 cents to $57.46 a barrel on the New York Mercantile Exchange, and traded for $57.29 as of 9:07 a.m. local time.

Brent for May settlement advanced 62 cents to $67.20 a barrel on the London-based ICE Futures Europe exchange, after adding 84 cents on Monday. The global benchmark crude traded at a $9.58 premium to WTI for the same month.

Saudi Arabia’s production cut means the country will ship less than 7 million barrels a day in April, significantly less than the 7.6 million barrels a day its customers requested, the Saudi official said.

Shale Surge

The IEA released its U.S. output forecast in a report before officials from OPEC and North American shale companies sat down for a dinner during CERAWeek by IHS Markit, the annual gathering in Houston of some of the energy industry’s biggest names. Earlier at the event, OPEC Secretary-General Mohammad Barkindo said bringing supply and demand back into equilibrium remains a “work in progress.”

Risk assets across financial markets were buoyed Tuesday after the U.K. struck a new deal for its exit from the European Union.

Prime Minister Theresa May made a last-minute decision to fly to France for late talks with European Commission President Jean-Claude Juncker. While the two leaders announced changes aimed at putting an end to the lengthy negotiations over Britain’s exit from the EU, it remains to be seen whether the new wording will convince U.K. lawmakers to sign off on the plan in a crunch vote Tuesday night.
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