Oil rises on OPEC cuts, U.S. sanctions on Iran and Venezuela

Tuesday,   12-Feb-2019   08:53 AM (IST)

Oil prices rose on Tuesday amid OPEC-led supply cuts and U.S. sanctions against Iran and Venezuela, although surging U.S. production and concerns over economic growth kept markets in check. U.S. West Texas Intermediate (WTI) crude oil futures were at $52.50 per barrel at 0102 GMT, up 9 cents, or 0.2 percent, from their last close. International Brent crude futures were up 18 cents, or 0.3 percent, at $61.69 per barrel. Analysts warn that markets are tightening amid voluntary production cuts led by the Organization of the Petroleum Exporting Countries (OPEC) and because of U.S. sanctions on Venezuela and Iran. But some said that supply-side risks were not receiving enough focus. Should U.S.-China talks to end trade disputes between the two nations have a positive outcome, the bank said oil markets would "switch attention from macro concerns impacting future demand growth to physical tightness and geopolitical risks impacting immediate supply". With OPEC engaged in supply management and the Middle East entangled in political conflicts while production outside the group surges, Bank of America Merrill Lynch said OPEC's global market share would fall as its outright output drops to 29 million barrels per day (bpd) in 2024 from 31.9 million bpd in 2018. Growing U.S. supply and a potential economic slowdown this year could cap oil markets. U.S. bank Morgan Stanley said the surge in U.S. crude oil production, which tends to be light in quality and which rose by more than 2 million barrels per day (bpd) last year to a record 11.9 million bpd, had resulted in overproduction of gasoline. Refining profits for gasoline have plunged since mid-2018, going negative in Asia and Europe, amid tepid demand growth and a surge in supply.