US sanctions and OPEC-led supply cuts boosting prices

Nick Oxford | Reuters 

A worker walks through an oil production facility owned by Parsley Energy in the Permian Basin near Midland, Texas, August 23, 2018. 

Oil markets are tightening at the start of the second quarter amid a flurry of intensifying risk indicators, the International Energy Agency (IEA) said Thursday.

But, the group warned an “extraordinarily” wide range of views about the health of the global economy was making it difficult to forecast oil prices.

It comes at a time when energy market participants are concerned surging U.S. crude stockpiles and an economic slowdown could soon dent fuel consumption.

However, global oil markets remain firm, amid OPEC-led supply cuts, U.S. sanctions on oil exporters Venezuela and Iran and escalating fighting in Libya.

“The huge increase in oil production we saw in the second half of 2018 has reversed following the implementation of the new Vienna Agreement and the increasing effectiveness of sanctions against Iran and Venezuela,” the Paris-based IEA said Thursday.

“This turnaround in supply has contributed to a dramatic increase in prices, with Brent crude rising from $50 a barrel at the end of December to more than $70 a barrel today.”

International benchmark Brent crude traded at around $71.28 Thursday morning, down 0.6 percent, while U.S. West Texas Intermediate (WTI) stood at $64.07, around 0.8 percent lower.

Brent and WTI crude futures have risen by approximately 30 and 40 percent respectively since the start of the year.