Oil climbs as Opec indicates continued production cuts

21 May, 2019 12:00 AM printer

NEW YORK: Oil started the week strongly after Saudi Arabia and other Opec+ members signaled intentions to keep supplies constrained for the rest of the year, while US tensions with Iran ratcheted up as President Donald Trump threatened the country in a tweet.

Futures in New York rose as much as 1.7 per cent, following a 1.8 per cent gain last week. Saudi Energy Minister Khalid Al Falih urged members of the alliance meeting in Jeddah to “stay the course” on output cuts. Meanwhile, just weeks after the US increased sanctions pressure on Iranian crude exports, Mr Trump tweeted “If Iran wants to fight, that will be the official end of Iran.”

Oil has rallied about 40 per cent this year as supply cuts have outweighed concerns about slowing demand growth caused by trade tensions between the US and China. Saudi Arabia and fellow oil producers have to balance their desire to maintain high crude prices with the need to fill any supply gaps caused by rising geopolitical risks in the Middle East and disruptions in Venezuela, Libya and Iran, report agencies.

“Crude prices are rising because investors view Opec wants to tighten supply and demand to maintain current prices,” said Takayuki Nogami, the chief economist at Japan Oil, Gas and Metals National Corporation. “While the outcome of the Opec+ meeting was in line with expectations, it’s still uncertain” what the producers will ultimately decide on production cuts in June, Mr Nogami said.

West Texas Intermediate crude for June delivery rose as much as $1.05 to $63.81 a barrel on the New York Mercantile Exchange and traded at $63.53 at 3:04 pm in Singapore. The contract added 1.8 per cent last week, the biggest weekly increase since early April. The contract expires after end of trading Tuesday. The more actively traded July contract rose to as high as $63.96.

Brent for July settlement rose 97 cents to $73.18 a barrel on the London-based ICE Futures Europe exchange. The contract added 2.3 per cent last week. The global crude benchmark traded at a $9.44 premium to WTI for the same month.