Oil prices moved little on Wednesday, supported by supply cuts by producer group, the Organisation of Petroleum Exporting Countries, OPEC and U.S. sanctions against oil exporters Iran and Venezuela, but pressured by expectations that an economic slowdown could soon dent fuel consumption.
International benchmark Brent futures were at $70.59 per barrel at 0409 GMT, down 2 cents from their last close.
U.S. West Texas Intermediate (WTI) crude oil futures were at $64.09 per barrel, up 9 cents from their last settlement.
Both benchmarks hit five-month highs on Tuesday, before easing on global growth worries.
Overall, oil markets have tightened this year because of U.S. sanctions on oil exporters Iran and Venezuela, as well as supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and some non-affiliated producers including Russia, a group known as OPEC+.
As a result, Brent and WTI crude oil futures have risen by around 30 percent and 40 percent respectively since the start of the year.
“The global oil market is clearly moving back towards balance thanks to OPEC+ production cuts. OPEC production has fallen 1.98 million barrels per day (bpd) from October levels,” ING bank said in a note.
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 sanctions by the United States.
“Venezuelan oil output is estimated to have fallen from 1.19 million bpd in October to 890,000 bpd in March, while output from Iran has fallen from 3.33 million bpd to 2.71 million bpd due to sanctions. Declines from these two exempt countries account for almost 47 percent of the reduction seen from OPEC,” ING said.
Despite the OPEC-led cuts and U.S. sanctions, not all regions are in tight supply as oil production in the United States rose by more than 2 million bpd since early 2018, to a record 12.2 million bpd.
“WTI has not seen the same strength (as Brent)… given the relatively more bearish fundamentals in the U.S. market,” said ING bank.
“U.S. crude oil inventories remain stubbornly high,” it added.
U.S. crude stocks rose by 4.1 million barrels in the week to April 5, to 455.8 million barrels, data from industry group the American Petroleum Institute showed on Tuesday.
On the demand side, there are concerns that an economic slowdown will soon hit fuel consumption.
It would be recalled that the International Monetary Fund (IMF) warned on Tuesday that the global economy was slowing more than expected and that a sharp downturn may be looming.
In its third downgrade since October, the IMF said the global economy will likely grow 3.3 percent this year, the slowest expansion since 2016.
The forecast cut 0.2 percentage point from the IMF’s outlook in January 2019.