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OPEC will probably extend its output cut in H2

The oil market has forgotten last year’s crash, returning a whopping 39 percent for the year till date. Crude made a steady comeback this year and sentiment has climbed as OPEC’s firmness to control output to support prices worked in the favour of oil producers.

The OPEC deal to curb oil production probably will be extended hopefully for another six months beyond the end of June.

Since crude oil prices have ended with gains, WTI crude oil experienced the longest weekly winning streak since November 2017 as crises from Venezuela to Libya threatened supplies, while optimism about the US-China trade talks buoyed the outlook for demand. In March, OPEC cut production for a fourth month, while supply risks are mounting in member nations exempt from the strategy.

Power failures that plagued Venezuela last month were said to have briefly slashed crude output by half. And in Libya, tensions are rising as military leader Khalifa Haftar ordered his forces to advance on the capital. Escalating tensions in Libya, the economic unravelling of Venezuela and the possibility that the White House won’t extend waivers to buyers of Iranian oil threaten to tighten supply further.

Crude production in Venezuela was 890,000 barrels a day in March, compared with 1.23 million a day in January, as blackouts across much of the country that began March 7 paralysed oil wells and rigs. The crisis is worsening and the risk of further output declines is increasing.

US sanctions on Venezuelan and Iranian oil, as well as output cuts by the Saudi Arabia-led OPEC, are creating a shortage of crude oil. Saudi Arabia, the world’s biggest oil exporter, increased May pricing for most crude oil grades to all of its markets as the kingdom continues to restrain production and shipments.

After Brent crude briefly topped $70 a barrel last week, there’ll be a series of reports in coming days that’ll help shape the outlook. Traders will receive updates on global supply and demand when OPEC issues its monthly report on April 10 and the International Energy Agency publishes its own take the following day. Both will give data showing how far OPEC has implemented its latest round of supply cuts. Hence, we expect the trend for oil to be bullish going into the next week.
Source: Moneycontrol

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