Global Oil Market getting tighter - April 30

[dan_s]

Reuters at 7:20AM ET from London
Oil prices are likely to stay buoyant this year as the U.S. decision to end waivers on Iranian oil and OPEC output curbs are expected to keep supply tight, a Reuters survey showed on Tuesday.

A monthly survey of 31 economists and analysts forecast Brent crude would average $68.57 a barrel in 2019, more than 2 percent higher than the $67.12 forecast in the previous poll in March.

U.S. light crude is seen averaging $60.23 per barrel this year, compared with $58.92 forecast in March.

The latest figures are the highest projections this year as analysts raised oil forecasts for a second straight month.

"The elimination of U.S. waivers for Iran will take another 0.5-1 million barrels per day from the oil market," said Frank Schallenberger, head of commodity research at LBBW.

"Together with political tensions in Libya and chaos in Venezuela this will make the tight situation on the supply side of the oil market even tighter. There is no doubt that high oil prices are here to stay!"

Oil has already rallied about 40 percent since the beginning of the year mainly helped by a deal between the Organization of the Petroleum Exporting Countries and other producers including Russia to curb output.

To compensate for the reduced supply from Iran, the United States is pressuring OPEC to raise output.

"If OPEC and its non-OPEC allies led by Russia do not make an allowance for on-going unplanned outages in Venezuela and Iran, they could run the risk of over-tightening the oil market should they decide to roll over production cuts when they meet again in Vienna in June," said Harry Tchilinguirian, strategist at BNP Paribas (PA:BNPP).

A majority of analysts who participated in the poll expect OPEC cuts to be extended until the end of the year, but at the same time they expect the group to recoup deteriorating output from Venezuela and Iran.

"Our expectation is for OPEC+ output to increase in the second half of 2019 as members chase higher oil prices but ultimately will contribute to an oversupplied market," said Edward Bell of Emirates NBD bank.

Brent is expected to average around $70 per barrel in the second and third quarters of this year, but fall slightly to near $69 by year-end due to rising production from the United States and lingering concerns over economic growth.

"We expect U.S. oil output to increase in 2019 as logistical bottlenecks continue to clear and recent high prices encourage drilling," said Capital Economics analyst Caroline Bain.

U.S. crude oil output from seven major shale formations is expected to rise to a record 8.46 million bpd in May, according to the U.S. Energy Information Administration.

Growth in global oil demand is expected to ease to 1-1.4 million barrels per day (bpd) this year from 1.2–1.5 million bpd forecast in the March poll.

[dan_s]

By Henning Gloystein and Dmitry Zhdannikov

SINGAPORE/LONDON (Reuters) - Oil prices topped $73 on Tuesday as Venezuela's opposition leader called on the military to back him to end Nicolas Maduro's rule and after Saudi Arabia said a deal between producers to curb output could be extended beyond June to the end of 2019.

The situation in Venezuela, an OPEC member whose oil exports have been hit by U.S. sanctions and an economic crisis, was fluid on Tuesday. The government promptly dismissed any suggestion of a military insurrection.

The Saudi comments from Energy Minister Khalid al-Falih came despite pressure from U.S. President Donald Trump to raise output to make up for a supply shortfall expected from tightening U.S. sanctions against Iran.

"There was an uptick even without Venezuela due to Falih's comments," said analyst Olivier Jakob at Petromatrix.

Brent crude futures had risen to $73.08 per barrel by 1143 GMT, up 1.44 percent from their last close.

U.S. crude futures were at $64.42, up 1.45 percent.

Brent hit a six-month high above $75 last week because of tightening global markets amid U.S. sanctions on Iran and Venezuela coupled with Russian oil export problems stemming from a contaminated pipeline.

Despite a shaky global economy, oil has surged almost 40 percent since January, lifted by supply cuts led by the Organization of the Petroleum Exporting Countries.

Matt Stanley, a broker with Starfuels in Dubai, said oil prices had risen this year due to the "choking" of supply rather than strong demand.

TIGHTER SANCTIONS

Falih's comments, made to Russian state news agency RIA, suggested Saudi Arabia would want to maintain some form of production cut despite Trump's demand that OPEC raise output.

Bank of America Merrill Lynch (NYSE:BAC) 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". < Iran' oil exports will drop from 1.2 million barrels per day in Q1 2019 to approximately 500,000 BOPD in June. China and Turkey will be slow to comply with the U.S. sanctions and Iran will continue to smuggle 100,000 to 200,000 BOPD out through Turkey. - Dan.

Despite this, the bank said it expected "a nearly balanced market in 2019" as output from OPEC and the United States rises.

French bank BNP Paribas (PA:BNPP) 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".

Belarus said on Tuesday that months of work would be needed to restore clean oil supplies via the Druzhba pipeline from Russia to Europe after Western oil consumers suspended imports of Urals crude due to contamination.

BNP said it expected 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 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.