Reuters | Feb 12, 2019 03:52
By Henning Gloystein
SINGAPORE (Reuters) - Oil prices rose on Tuesday amid OPEC-led supply cuts and U.S. sanctions against Iran and Venezuela, although analysts expect surging U.S. production and concerns over economic growth to keep markets in check.
U.S. West Texas Intermediate (WTI) crude oil futures were at $52.78 per barrel at 0329 GMT, up 37 cents, or 0.7 percent, from their last close.
The ongoing closure of parts of the Keystone pipeline that brings Canadian oil into the United States also helped prop up WTI, traders said.
International Brent crude futures were up 50 cents, or 0.8 percent, at $62.01 per barrel.
Analysts said markets are tightening amid voluntary production cuts led by the Organization of the Petroleum Exporting Countries (OPEC) and because of U.S. sanctions on Venezuela and Iran.
But some said supply-side risks were not receiving enough focus.
"We believe that oil is not pricing in supply-side risks lately as markets are currently focused on U.S.-China trade talks, ignoring the risks currently in place from the loss of Venezuelan barrels," U.S. bank J.P. Morgan said in a weekly note.
Should U.S.-China talks to end trade disputes between the two nations have a positive outcome, the bank said oil markets would "switch attention from macro concerns impacting future demand growth to physical tightness and geopolitical risks impacting immediate supply".
With OPEC engaged in supply management and the Middle East entangled in political conflicts while production outside the group surges, Bank of America (NYSE:BAC) Merrill Lynch said OPEC's global market share would fall as its outright output drops to 29 million barrels per day (bpd) in 2024 from 31.9 million bpd in 2018.
Growing U.S. supply and a potential economic slowdown this year could cap oil markets.
"The worries of oversupply stemming from the U.S. will likely remain a dominant theme as we approach the warmer months," said Edward Moya, market analyst at futures brokerage OANDA.
U.S. bank Morgan Stanley (NYSE:MS) said the surge in U.S. crude oil production, which tends to be light in quality and which rose by more than 2 million barrels per day (bpd) last year to a record 11.9 million bpd, had resulted in overproduction of gasoline.
"Light crudes naturally yield more gasoline, and together with relatively modest demand-growth, this has driven gasoline stocks sharply higher and crack spreads sharply lower in recent months," Morgan Stanley said.
Refining profits for gasoline have plunged since mid-2018, going negative in Asia and Europe, amid tepid demand growth and a surge in supply.
As a result, Morgan Stanley said "low refining margins and weaker economic data means oil prices can rally only so much (and) we continue to see modest upside for Brent to $65 per barrel in the second-half (of 2019)".
Bank of America also warned of "a significant slowing in growth globally", adding that it expected Brent and WTI to average $70 per barrel and $59 per barrel respectively in 2019, and $65 per barrel and $60 per barrel in 2020.
(GRAPHIC: U.S. oil production & drilling levels - https://tmsnrt.rs/2Tm4u4I)
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.