OPEC cuts, Iran sanctions push oil prices up

Supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) have driven crude oil prices higher in 2019.

In order to avoid a large supply overhang, OPEC combined with some non-affiliated producers like Russia agreed to cut production by 1.2 million barrels per day. The sanctions by the US on Iran and Venezuela have also caused oil prices to spike.

Countering the upward traction in oil prices are the bumper oil productions at US rigs, which rose to a record 11.9 million barrels per day, a hike of 2 million barrels per day from last year. This has resulted in a huge buildup of US oil inventories. US crude oil inventories have increased to 448.5 million barrels.

US West Texas Intermediate (WTI) crude oil futures were at US$57.3 per barrel, within touching distance of their 2019 highs of US$57.55. International Brent Crude prices had also hit a 2019 peak of US$67.38 per barrel earlier this week.

Saudi Aramco announced that they would be temporarily closing the Yanbu refinery which has a capacity of 4,00,000 barrels per day capacity for maintenance. April Brent Crude gained 1 per cent to settle at US$67.08 per barrel on London’s Intercontinental Exchange.