Bonny light price hits $71.74

Jermaine Castillo
April 12, 2019

Crude prices could decline further if oil output in the USA, the world's largest producer, continues to remain at an all-time high and economic slowdown hurts overall oil demand worldwide.

Despite the surge in US supply and the economic concerns, global oil markets remain tight amid supply cuts led by the Organization of the Petroleum Exporting Countries (Opec), US sanctions on oil exporters Iran and Venezuela, and escalating fighting in Libya.

US crude stocks rose by 4.1 million barrels to 455.8 million barrels in the week to April 5, data from industry group the American Petroleum Institute showed on Tuesday.

Crude oil futures for May ended up $63, or 0.98%, at $64.61 a barrel.

At 456.5 million barrels, US crude oil inventories were at the five-year average for this time of year.

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Global oil supplies declined last month amid another steep drop in OPEC output, as the Saudis cut more production than promised and Venezuela's unintended losses swelled. OPEC further announced that it expects 2019 demand for its crude oil to be 30.30 million bpd, 160,000 bps lower from the previous estimate.

Global oil demand is estimated to average 99.91 million b/d this year, compared with 98.70 million b/d in 2018, OPEC said.

OPEC also revised down non-OPEC oil supply growth in 2019 by 60,000 bpd "due to extended maintenance in Kazakhstan, Brazil and Canada".

The Dutch bank said the reduction was not only down to voluntary supply cuts, which the group started this year to prop up prices, but also involuntary curbs from Venezuela and Iran - which are exempt from the OPEC cut pact - due to USA sanctions.

The kingdom also self-reported production of 9.79 million b/d, its lowest since January 2017 and a fall of 350,000 b/d month on month.

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The average daily oil production volume in the first quarter of this year reached 799,000 barrels. That is much below its quota of 10.31 million bpd under the cut agreement.

U.S. crude oil inventories increased during the week ending April 5, the U.S. Energy Information Administration (EIA) said in a report on Wednesday.

Worldwide benchmark Brent futures settled at $71.73 a barrel, gaining $1.12, or 1.59 percent, after hitting a five-month high of $71.78 a barrel.

Despite the OPEC-led cuts and USA sanctions, not all regions are in tight supply.

Distillate stockpiles, which include diesel and heating oil, fell by 116,000 barrels, versus expectations for a 1.3-million-barrel drop, the EIA data showed.

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