Oil Prices Extend Climb on Falling Supply
— Oil prices rose Monday morning, holding on to near three-month highs reached at the end of last week amid a weaker dollar and signs of shrinking global crude supply.
— Brent crude, the global oil benchmark, was trading up 0.12% at $66.33 a barrel on London’s Intercontinental Exchange.
— West Texas Intermediate futures, the U.S. oil standard, were up 0.74% at $56.00 a barrel on the New York Mercantile Exchange.
OPEC: Brent climbed by 6.7% last week, bolstered by fresh evidence the Organization of the Petroleum Exporting Countries is making good on its promise to cut crude production.
“OPEC and major producer compliance with the production limit agreement have kept crude prices stable,” said Alfonso Esparza, senior market analyst at OANDA.
The oil cartel reported last week that its crude output had fallen by nearly 800,000 barrels a day in January, to average 30.81 million barrels a day, driven by curbs from the cartel’s de facto leader Saudi Arabia. OPEC and 10 producers outside the group, led by Russia, agreed late last year to cut crude production by a collective 1.2 million barrels a day for the first six months of this year.
U.S. Dollar: Prices have also been supported by a softer U.S. dollar, which tends to have an inverse relationship with dollar-denominated commodities like oil. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 of its peers, was down roughly 0.10% Monday morning. “Trade negotiations between the U.S. and China are close to a breakthrough and have put the greenback on the back foot,” Mr. Esparza said.
Sanctions: Oil prices have been undergirded by U.S. sanctions on the oil industries of key OPEC members Iran and Venezuela. Those countries were exempted from the latest OPEC-led production-cut deal, but supply disruptions as a result of the sanctions are also helping to bring down OPEC’s total output.
“The supply side is currently driven by an OPEC+ member that is very serious about trying to prop up this market [Saudi Arabia], while the U.S. is actively limiting Venezuelan and Iranian oil flows,” analysts at consulting firm JBC Energy wrote in a note Monday. “At least in the short-term, it would seem that not much stands in the way of prices gunning for a test of $70 for Brent,” they added.
— The American Petroleum Institute, an industry group, on Wednesday releases weekly data on U.S. oil inventories, followed by official government data from the U.S. Energy Information Administration on Thursday.
— Oil officials and industry leaders are set to gather in London next week for the annual International Petroleum Week.
Source: Dow Jones