Economy

Oil rises above $71 on tight supply

Oil rises above $71 on tight supply

Brent and WTI futures have risen by 40% and 30% respectively since the start of the year.

"OPEC's ongoing supply cuts and U.S. sanctions on Iran and Venezuela have been the major driver of prices throughout this year, " said Hussein Sayed, Chief Market Strategist at futures brokerage FXTM.

Meanwhile, West Texas Intermediate gained 0.47 percent to Dollars 64.28, while Brent crude the worldwide benchmark edged higher 0.28 percent to USD 70.81 per barrel.

US crude stockpiles last week rose to their highest level since November 2017 as imports grew, while gasoline inventories posted the steepest drawdown since September 2017, the Energy Information Administration said.

However, the EIA data showed gasoline stockpiles fell 7.7 million barrels in the week, the steepest drop since September 2017.

"The report is supportive due to the large gasoline inventory draw", said John Kilduff, a partner at Again Capital LLC in NY.

Al Mazrouei was obviously hinting at the decision by OPEC and Russian Federation to reverse the production cuts in the summer of 2018, in order to ensure a well-supplied market amid expectations that the USA would drive Iranian oil exports to zero.

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A supply cut led by the OPEC (Organization of Petroleum Exporting Nations), a 14-nation pact of oil exporting nations headquartered in Vienna, had resulted in a rally of more than 30 percent this year for the United Kingdom crude despite steep economic slowdown.

An agreement was reached to reduce daily oil production by 1.2 million barrels at the 5th OPEC and non-OPEC Ministerial Meeting in Vienna on December 7, 2018.

"Declines from these two exempt countries account for nearly 47% of the reduction seen from OPEC", ING added.

"Venezuelan oil output is estimated to have fallen from 1.19 million bpd in October to 890,000 bpd in March, while output from Iran has fallen from 3.33 million bpd to 2.71 million bpd due to sanctions".

The Dutch bank said the reduction was not only down to voluntary supply cuts, which the group started this year to prop up prices, but also involuntary curbs from Venezuela and Iran - which are exempt from the OPEC cut pact - due to US sanctions.

"Brent crude passed the US$70 a barrel mark for the first time in months a few days ago and now, thanks to the new from Libya, it has continued rising".

"The increase in crude supplies still has to do with some of the logistical issues we had in Texas, along with refinery problems", said Phil Flynn, an analyst at Price Futures Group in Chicago.