Oil prices on Tuesday reversed earlier losses after Saudi Arabia said a deal between producers to withhold output that has been in place since January could be extended beyond June to cover all of 2019, Reuters/CNBC reported.
The statements by Saudi energy minister Khalid Al-Falih came despite pressure by U.S. President Donald Trump to raise output to make up for a supply shortfall expected from tightening U.S. sanctions against Iran.
Brent crude futures were at $72.25 per barrel at 0701 GMT, up 21 cents, or 0.3 percent, from their last close. U.S. West Texas Intermediate (WTI) crude futures were at $63.67 per barrel, up 17 cents, or 0.3 percent, from their previous settlement.
Prices had come under downward pressure earlier on Tuesday after data on China’s factory activity weighed on financial markets, including crude oil futures, as it suggested Asia’s biggest economy is still struggling to regain traction.
Despite a shaky global economy, oil prices have surged by almost 40 percent since January, lifted by supply cuts led by the Middle East-dominated producer club of the Organization of the Petroleum Exporting Countries (OPEC) as well as by U.S. sanctions on producers Iran and Venezuela, CNBC added.
The Saudi statements appear to defy calls by Trump late last week for OPEC and its de-facto leader Saudi Arabia to raise output to meet the supply shortfall caused by the tightening Iran sanctions.
Bank of America Merrill Lynch said “Iranian oil production will fall to 1.9 million barrels per day in 2H19 from 3.6 million barrels per day in 3Q18 as U.S. sanctions kick in and waivers eventually expire.”
Despite this, the bank said it expected “a nearly balanced market in 2019” as output from OPEC and also the United States will rise. French bank BNP Paribas said it expected oil prices “to rise in the near-term” as crude producers were “over-tightening the market in the face of unplanned supply outages and resilient oil demand.”
The bank expects crude markets to climb until the third quarter of 2019, adding that prices would then “start to become vulnerable to a sharp rise in U.S. exports of light crude thanks to pipeline and terminal capacity expansion.”
U.S. exports exceeded 3 million barrels per day (bpd) for the first time in early 2019 amid a more than 2 million bpd production surge over the past year, to a record of more than 12 million bpd.