Oil nears 2019 highs spurred by OPEC production cuts

Oil prices floated near 2019 highs on Thursday, supported by OPEC supply cuts that took effect in January, with the West Texas Intermediate (WTI) futures hitting $57.17 a barrel during midday trading – closing in on a high of $57.55.

Elsewhere in the market, Brent crude futures slid by 4% to $67.04 a barrel after hitting their own 2019 high of $67.38 on Wednesday.

OPEC supply cuts help stabilise oil prices

Since taking effect in January, supply cuts agreed by OPEC have helped oil prices increase to above $60 dollars a barrel, after many market commentators feared the commodity would fall below the $40 back in November last year.

The Saudi Arabia-led organisation agreed near the end of last year, alongside non-OPEC producers like Russia to curtail oil production by 1.2 billion barrels a day in an effort to stop the commodities decline in price which had been in freefall throughout the latter half of 2018.

‘Willingness of the OPEC+ group to adhere with the output cut agreement will remain supportive of oil prices in the run-up to their scheduled April meeting,’ senior energy analyst at Interfax Energy Abhishek Kumar said.

‘Sharply declining oil output from Iran and Venezuela will further prompt bullish sentiment in the market,’ he added.

Another factor helping oil prices to surge of late is sanctions placed on Iranian and Venezuelan crude exports by US authorities, with the ongoing crisis in Libya hurting its supply.

Global economic slowdown hampering oils recovery

Some analysts were quick to point out that oil prices would likely have climbed above 2019 highs but concerns over a slowdown in global economic growth have left investors skittish.

‘Slowing economic growth will invariably lead to weakness in fuel consumption, thus eroding bullish gains for oil prices,’ Philip Futures analyst Benjamin Lu said.