Oil prices rose on Tuesday, lifted by healthy market demand and output cuts led by the Organization of Petroleum Exporting Countries, OPEC.
A rally in broader financial markets also supported crude futures, although analysts still warned of risks to the global economy.
The U.S. West Texas Intermediate (WTI) crude oil futures were at $56.97 per barrel up 18 cents, or 0.3 per cent, from their last settlement, while the Brent crude futures were at $66.75 per barrel, up 17 cents, or 0.3 per cent.
“(Despite economic headwinds), we still see Brent prices averaging $70 per barrel this year and expect WTI to lag, averaging $59 per barrel in 2019,” said Bank of America Merrill Lynch.
It said that was partly due to demand for marine diesel expected from next year as part of new fuel rules from the International Maritime Organization.
“With diesel yields already maxed out, refiners may need to lift runs in 2H19 to meet rising demand for marine distillates,” it said.
Oil prices have been receiving broad support this year from supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and non-affiliated allies like Russia aimed at tightening markets.
Traders also pointed to the political and economic crisis in OPEC-member Venezuela as a driver for oil prices.
Venezuela’s opposition-run congress on Monday declared a “state of alarm” over a five-day power blackout that has crippled the country’s oil exports and left millions of citizens scrambling to find food and water.
Offsetting OPEC efforts to tighten the market and disruptions like Venezuela is a surge in U.S. oil supply.
The United States will drive global oil supply growth over the next five years, adding another 4 million barrels per day (bpd) to the country’s already booming output, the International Energy Agency said on Monday.
U.S. crude oil output will rise nearly 2.8 million bpd, growing to 13.7 million bpd in 2024 from an average of just under 11 million bpd in 2018, the IEA said, making the United States by far the biggest oil producer in the world.
With U.S. production booming, the country needs to import less and is increasingly turning abroad to sell surplus oil.
“The decrease in net crude oil imports (December, 2018) was driven primarily by lower imports from Saudi Arabia (down 160,000 bpd month-on-month) and higher exports to Asian countries such as South Korea (up 200,000 bpd month-on-month), China (up 90,000 bpd month-on-month) and India (80,000 bpd month-on-month),” Barclays bank said.