Oil up one percent on tightening crude supply, upbeat economic data

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.

Venezuelan production dropped due to USA sanctions, which added to an already deep economic and political crisis in the country, while Iranian production is also expected to drop further as a result of the U.S. sanctions which are to be tightened 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.

The Organization of the Petroleum Exporting Countries, Russia and other producers, an alliance known as OPEC+, are reducing output by 1.2 million bpd from January 1 for six months.

OPEC and its allies meet in June to decide whether to continue withholding supply.

The U.S.' sanctions on Iran and Venezuela caused a decline in oil production and exports of these countries.

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The report pointed to a slightly under-supplied market in 2019 if OPEC kept pumping at March's level.

The glut of supply in the global oil market is falling after Saudi Arabia-led OPEC and Russia-led non-OPEC agreed on December 7 to trim their total output by 1.2 million barrels per day (bpd) for the first six months of 2019.

In 2018 OPEC+ chose to increase output at its mid-year meeting, only to return to production cuts in 2019. Saudi Arabia is set on maintaining the production cuts into the second half of 2019, while Russian Federation refuses to commit to an extension.

"Geopolitically infused rallies could shoot prices toward or even past the $80 per barrel mark for intermittent periods this summer", the Canadian bank said.

It said that US, Brazil, Russia, UK, Australia, Ghana, Sudan and South Sudan will be the main drivers of supply growth this year.

Saudi Arabia's crude output fell 289,000 bpd in March to average 9.79 million bpd, according to an average of the six secondary sources that OPEC uses to gauge production. "The companies are struggling to curb production".

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