A VLCC oil tanker is seen at a crude oil terminal in Ningbo Zhoushan port, Zhejiang province, China. Picture: REUTERS
A VLCC oil tanker is seen at a crude oil terminal in Ningbo Zhoushan port, Zhejiang province, China. Picture: REUTERS

Singapore — Oil prices dipped on Monday amid concerns that an economic downturn may dent fuel consumption, but crude markets remain broadly supported by supply cuts led by producer group Opec and US sanctions against Iran and Venezuela.

Brent crude oil futures were at $67.03 per barrel at 2.31am GMT , down 13c, or 0.2%, from their last close, but not far off the $68.14 a barrel 2019-high reached last week.

US West Texas Intermediate (WTI) futures were at $58.32 per barrel, down 20c, or 0.3%, from their last settlement, and also not far off their 2019-high of $58.95 from the previous week.

“The greatest downside risk to our oil price view is demand weakness on slower economic growth. Our base case is that global oil demand will increase by 1.3-million barrels per day (bpd) in 2019…. A synchronized global slowdown in growth could push global demand growth to below 1-million bpd,” Bernstein Energy said on Monday.

US manufacturing output fell for a second consecutive month in February, in a sign that the world’s biggest economy has been slowing down in the first quarter.

In Asia, Japan’s exports fell for a third consecutive month in February in a sign of growing strain from slowing global demand.

Despite this, oil prices have gained about a quarter since the start of the year amid US sanctions against Iran and Venezuela, and as Opec and non-affiliated allies such as Russia — known as Opec+ — have pledged to withhold 1.2-million bpd in supply to prop up prices.

Opec’s de-facto leader, Saudi Arabia, said on Sunday that balancing oil markets is far from done as inventories are still high.

Russia also said production cuts will stay in place at least until June.

As a result, Bernstein forecast an inventory draw of 37-million barrels in the first quarter for the 36 member countries of the Organisation for Economic Co-operation and Development (OECD), which comprises most industrialised nations.

The International Energy Agency (IEA) said on Friday it expects oil markets to be in a modest deficit from the second quarter of 2019.

Key for the supply and demand balance will be the US, where crude production has soared by about 2-million bpd over the past year, thanks largely to an onshore boom in shale formation drilling.

The number of rigs drilling for new oil production in the US has been falling in 2019, and hit its lowest level since April 2018 last week, at 833 operating rigs.

However, US crude oil production still increased at the start of 2019, hitting a record 12.1-million bpd in February, data from the Energy Information Administration (EIA) showed.

Output has since dipped back to 12-million bpd, but that still makes America the world’s biggest crude oil producer.