Oil prices rose about 1% yesterday, on track for their biggest quarterly rise in a decade, as US sanctions against Iran and Venezuela as well as Opec-led supply cuts overshadowed concerns over a slowing global economy.
The May Brent crude oil futures contract, which expired Friday, gained 54 cents, or 0.8%, to $68.36 a barrel by 1:10pm EDT (1710 GMT), set for a gain of 27% in the first quarter.
The more-active June contract was up 45 cents to $67.55 a barrel.
US West Texas Intermediate (WTI) futures rose 80 cents, or 1.4%, to $60.10 a barrel, and were on track for a rise of 32% over the January-March period.
For the two benchmarks, the first quarter was the best-performing quarter since 2009, when both gained about 40%. US sanctions on Iran and Venezuela have boosted oil prices this year, as the sanctions have restricted crude exports out of the countries.
The United States is keen to see that Malaysia, Singapore and others are fully aware of Iranian oil shipments, a top US sanctions official said yesterday.
Sigal Mandelker, under-secretary of the Treasury for Terrorism and Financial Intelligence, told reporters in Singapore that the United States had placed additional “intense pressure” on Iran this week.
“It seems that the Trump administration may be more serious about imposing sanctions on Iranian oil this time around,” said John Kilduff, a partner at Again Capital LLC in New York.
Meanwhile, the United States has instructed oil trading houses and refiners around the world to further cut dealings with Venezuela or face sanctions themselves, even if the trades are not prohibited by published US sanctions, three sources familiar with the matter said. Also lifting prices this year has been a deal between the Organisation of the Petroleum Exporting Countries and allies such as Russia to cut output by around 1.2mn barrels per day, which officially started in January.
Opec and its allies are scheduled to meet in June to set policy, but some cracks in the union are emerging.
Saudi Arabia is struggling to convince Russia to stay much longer in the pact, and Moscow may agree only to a three-month extension, three sources familiar with the matter said.
The market has also been supported by slower output growth in the US, the world’s top crude producer, where record production has steadied at a record over 12mn bpd since mid-February.
In its latest monthly report yesterday, the government said US crude production edged lower in January to 11.87mn bpd.
US energy firms this week reduced the number of oil rigs operating to their lowest in nearly a year, cutting the most rigs in a quarter in three years, General Electric Co’s GE.N Baker Hughes energy services firm said.
Futures gains have been capped this quarter by concerns about a slowing global economy that could hit crude demand.
US consumer spending rebounded less than expected in January and incomes rose modestly in February, suggesting the economy was fast losing momentum after growth slowed in the fourth quarter.
Elsewhere, three of China’s top state-controlled bank posted their weakest quarterly profit growth in more than two years.
Still, Barclays bank forecast oil prices “are likely to move still higher in Q2 and average $73 per barrel ($65 WTI), and $70 for the year.” A monthly Reuters survey of economists and analysts forecast Brent would average $67.12 a barrel in 2019, about 1% higher than the previous poll’s $66.44.
A pumping jack stands in an oilfield operated by Bashneft PAO in the village of Otrada, 150kms from Ufa, Russia. Saudi Arabia is struggling to convince Russia to stay much longer in the pact, and Moscow may agree only to a three-month extension, three sources familiar with the matter said.
