Oil prices hovered close to 2019 peaks reached the previous day, propped up by supply cuts led by producer club OPEC and by U.S. sanctions against Iran and Venezuela. Oil prices have already hit four-month highs, forcing a range of analysts to overhaul their expectations for this year.
Brent crude oil 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.
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+’. Beyond OPEC and Russia’s supply policy, oil prices have also been boosted by U.S. 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 U.S. sanctions were announced.
Venezuelan crude oil production has also dwindled amid U.S. 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.
The outages in Venezuela could swamp the rebound in supply from Libya, Goldman noted. But the real surprise has been demand. At the end of 2018 and the start of this year, oil prices hit a bottom and concerns about global economic stability dominated the narrative. But, for now at least, demand has been solid. In January, demand grew by 1.55 million barrels per day (mb/d) year-on-year.
“Gasoline in particular is surprising to the upside, helped by low prices, confirming our view that the weakness in cracks at the turn of the year was supply driven,” Goldman Sachs said in a note.
Demand in China is growing at a stronger rate than expected, while other emerging markets are set to shake off a rough 2018 that saw a strong dollar, rising interest rates and high oil prices.