Boats float in front of the Vopak oil storage terminal in Johor, Malaysia. Picture: REUTERS/HENNING GLOYSTEIN
Boats float in front of the Vopak oil storage terminal in Johor, Malaysia. Picture: REUTERS/HENNING GLOYSTEIN

Singapore — Oil prices were near 2019 highs on Tuesday, supported by supply cuts led by producer club Opec.

US sanctions against oil producers Iran and Venezuela are also boosting prices, although traders said the market may be capped by rising US output.

US West Texas Intermediate (WTI) futures were at $59.10 per barrel at 0314 GMT, virtually unchanged from their last settlement and close to the 2019 high of $59.23 reached the previous day.

Brent crude oil futures were up 10c at $67.64 per barrel, also close to this year’s peak of $68.14 reached late last week.

In China, Shanghai crude futures, launched in March last year, bounced 4.5% from their last close to 467.6 yuan ($69.64) per barrel, also near 2019 highs of 475.7 yuan a barrel reached during a brief spike in February.

In dollar terms, this pushed Shanghai crude into a premium over Brent.

Opec on Monday scrapped its planned meeting in April, effectively extending supply cuts that have been in place since January until at least June, when the next meeting is scheduled.

Opec and a group of nonaffiliated producers including Russia, known as Opec-plus, started withholding supply to halt a sharp price drop in the second half of 2018, when markets came under pressure from surging output as well as an economic slowdown.

“The Opec-plus deal has brought stability to crude prices and signs of an extension have taken crude higher,” said Alfonso Esparza, senior market analyst at futures brokerage Oanda.

Prices have been further supported by US sanctions against oil exports from Iran and Venezuela, traders said.

Because of the tighter supply outlook for the coming months, the Brent forward curve has gone into backwardation since the start of the year, meaning that prices for immediate delivery are more expensive than those for dispatch further in the future, with May Brent prices currently around $1.20 per barrel more expensive than December delivery Brent.

Outside Opec, analysts are eyeing US crude oil production, which has soared by more than 2-million barrels a day since early 2018, to around 12-million barrels a day, making America the worlds biggest producer ahead of Russia and Saudi Arabia.

Weekly output and storage data will be published by the Energy Information Administration (EIA) on Wednesday.

On the demand-side, there is concern that an economic slowdown will erode oil consumption.

Bank of America Merrill Lynch said in a note that economic “risks are skewed to the downside” and that “we forecast global demand growth of 1.2-million barrels a day year-on-year in 2019 and 1.15-million barrels a day during 2020”.

The bank said it expected “Brent and WTI to average $70 a barrel and $59 a barrel respectively in 2019, and $65 a barrel and $60 a barrel in 2020”.