Crude oil prices rose Monday, supported by Middle East tensions and Opec+ supply cuts, as well as continued crude disruptions from Russia after a pipeline contamination problem discovered last month, Kallanish Energy learns.
Output reductions, both voluntary by Opec+, which includes most Opec members along with a number of other producer nations led by Russia, plus those resulting from U.S. sanctions, have helped Brent crude rise by roughly 29% this year.
Brent settled Monday at $70.11 a barrel, rising $1.42, or 2.07%, after having fallen by roughly 4.5% last week. U.S. West Texas Intermediate crude futures were up 59 cents, or 1%, to $59.24/Bbl at 1:52 p.m. ET.
The Memorial Day holiday in the U.S., and a bank holiday in the UK Monday limited participation, keeping volumes low.
Tensions between the U.S. and Iran, with Washington’s announcement last Friday it would deploy more troops to the Middle East, raised the prospect of supply disruptions and supported prices, Reuters reported.
Russia’s oil production continued to fall this month, two industry sources told Reuters Monday, under pressure from lower exports after shipments via the Druzhba pipeline to Europe were found to be contaminated in April.
Falling output due to the contamination helped to tighten the market and boost prices.
Supply reductions of roughly 1.2 million barrels per day (Mmbpd) by Opec+ have also helped crude futures rally.
In comments suggesting Opec members are in no rush to ease supply restraint ahead of a mid-year meeting to review policy, Kuwait’s oil minister Khaled al-Fadhel said the market was expected to be in balance.
“We still have some more work to do. I believe the market is expected to be balanced during the 2nd half of 2019, more towards the end of the year,” Al-Fadhel told Reuters.
In addition to the Opec+ supply cuts, U.S. sanctions on Iran and Venezuela have curbed their crude exports, reducing supplies further.
Brent’s price structure remains in backwardation, with prices for prompt delivery higher than those for future dispatch, suggesting a tight balance between supply and demand.
Concerns about crude demand, however, limited gains.
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