Yemisi Izuora
Oil prices on Friday hovered close to 2019 peaks reached the previous day, boosted by supply cuts led by producer club OPEC and by US sanctions against Iran and Venezuela.
Brent crude futures were at $67.82 per barrel down 4 cents from their last close but within a dollar of the $68.69 per barrel 2019-high marked the day before.
Also, the US West Texas Intermediate (WTI) futures were at $60 per barrel, virtually unchanged from their last settlement and not far off their 2019 peak of $60.39 touched on Thursday.
Prices have been propped up by supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and non-affiliated allies such as Russia, often referred to as ‘OPEC+’.
Despite a more than a quarter increase in crude prices this year, Canadian investment bank RBC Capital Markets said oil was “still below the fiscal breakeven level in a number of OPEC countries”, meaning that many producers have an interest in further propping up the market.
“With the driver of the OPEC bus, Saudi Arabia, showing no signs of wavering in the face of renewed pressure from Washington, we believe that OPEC is likely to extend the deal for the duration of 2019 when they next assemble in Vienna in June,” RBC said.
RBC said Russia was only a reluctant partner in the supply cuts, but would “ultimately opt to preserve the arrangement and retain a leadership role of a 21-nation group that accounts for around 45 percent of global oil output”.
Beyond OPEC and Russia’s supply policy, oil prices have also been boosted by US sanctions on OPEC-members Iran and Venezuela.
Iranian crude oil shipments have averaged only just over 1 million bpd in March, down from 1.3 million bpd in February and a 2018 peak of at least 2.5 million bpd in April, before the US sanctions were announced.
Venezuelan crude oil production has also dwindled amid US sanctions and an internal political and economic crisis, plunging from a high of more than 3 million bpd at the start of the century to not much more than 1 million bpd currently.
Putting a break on further price increases has been a US crude oil production jump of more than 2 million bpd since early 2018 to a record 12.1 million bpd, making the United States the world’s biggest producer ahead of Russia and Saudi Arabia.
Soaring US output has resulted in increasing exports, which have doubled over the past year to more than 3 million bpd.
The International Energy Agency (IEA) estimated that the United States would become a net crude oil exporter by 2021.