Brent oil climbed above $65 a barrel to its highest this year as Opec-led supply cuts and this week’s announcement of a higher than expected cut by Saudi Arabia encouraged investors.
The international oil benchmark reached $65.20 by 1310GMT on Friday, the 63 cent gain equating to a rise of about 1 per cent. Brent approached near three-month highs and was set for a gain of nearly 5 per cent on the week.
US West Texas Intermediate crude futures were also up about 1 per cent, rising 53¢ to $54.94.
The Organization of the Petroleum Exporting Countries and allies led by Russia started voluntary production cuts last month, aiming to tighten the market.
Top exporter and de facto Noah Browning leader Saudi Arabia said on Tuesday it would cut more than half a million barrels per day more in March than the deal called for, sending prices surging.
Prices were also buoyed by the partial closure of Saudi Arabia’s Safaniya, its largest offshore oilfield with production capacity of more than one million bpd.
“Brent should average $70 per barrel in 2019, helped by voluntary [Saudi Arabia, Kuwait, UAE] and involuntary [Venezuela, Iran] declines in Opec supply,” Bank of America Merrill Lynch said. The bank said it expects a drop of 2.5 million bpd in Opec supply in the fourth quarter of 2019 from a year earlier.
However, the global supply picture remains uncertain.
US oil production is on the rise, while the seizure of Libya’s main oilfield by Eastern armed forces this week could soon lead to its reopening. But US sanctions on Venezuela and Iran have have helped to tighten global supply and security threats could threaten Nigerian production after general elections this weekend.
“Looking ahead, the prognosis for Venezuela and Iran remains skewed to the downside. As such, they should continue to act as important pillars of price support. The same, however, can’t be said for Libya,” said Stephen Brennock of oil broker PVM.
“This risks throwing a spanner in the works for Pec’s rebalancing ambitions and, therefore, the price recovery.”
Faltering global economic growth is also a concern, with signs of a slowdown now abundant in Europe, Asia and the United States, which could lead to slowing growth in fuel demand.