April 19, 2019

Oil prices rise after OPEC cuts, USA sanctions on Iran, Venezuela

14 April 2019, 11:11 | Joann Bryant

OPEC projects to tighter oil market in 2019

The market outlook remains unclear and much depends on how far Washington tightens the screw on Iran and Venezuela before Opec’s June meeting. ─ Reuters  File

However, global oil markets remain firm, amid Opec+ supply cuts, USA sanctions on oil exporters Venezuela and Iran and increased fighting in Opec member Libya.

Production in Venezuela has been plunging as the U.S. sanctions add to a deep economic and political crisis, while the USA government is expected to tighten oil sanctions against Iran in May.

"The huge increase in oil production we saw in the second half of 2018 has reversed following the implementation of the new Vienna Agreement and the increasing effectiveness of sanctions against Iran and Venezuela", Paris-based IEA said Thursday.

OPEC, Russia and other non-member producers are reducing output by 1.2 million bpd from January 1 for six months.

"I expect an extension for a further period, but maybe there will be some adjustment", this source said.

The rig count fell for the past four months as independent exploration and production companies cut spending on new drilling to focus on earnings growth instead of increased output.

The research and analysis arm of the Organisation of Petroleum Exporting Countries pointed towards a much tighter market in 2019 as the group has seen its production fall significantly this year, led by curbs to Saudi Arabian output along with dramatic, involuntary declines from sanctions-hit Venezuela.

Venezuela pumped 960,000 bpd in March, down nearly 500,000 bpd from February, OPEC said in a report on Wednesday.

Oil markets have been lifted by more than 30 percent this year by supply cuts led by the Organization of the Petroleum Exporting Countries and USA sanctions on oil exporters Iran and Venezuela, plus escalating conflict in OPEC member Libya.

The Canadian Central Bank said that the rising prices are fed by geopolitical factors and could bring prices to $80 per barrel or more. "It all depends on where prices are by the end of May and June".

The report also said that Angola was one of China's three largest oil suppliers, together with Saudi Arabia and Russian Federation, with shares of 11.3%, 15.2% and 14.6% in February, respectively.

The two major producers are estimated to account for 1.76 million bpd in loss output this year, according to the International Energy Agency's (IEA) Oil 2019 Report released on March 11.

"Russia has started talks about an oil production rise as it can hardly follow the OPEC+ deal", said another Russian energy source.

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