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Oil prices hold near multimonth highs Tuesday as OPEC supply appears in check

Por Myra P. Saefon / Marketwatch

Petroleumworld 03 19 2019

Oil futures held ground near multimonth highs on Tuesday with major global producers outside the U.S. expected to continue to keep a lid on output.

The U.S. benchmark, however, eased back to settle a few cents lower after finishing Monday at its highest since November as the Organization of the Petroleum Exporting Countries and its allies looked set to continue their crude production cuts until June.

April West Texas Intermediate crude CLJ9, -0.19%  fell by 6 cents, or 0.1%, to settle at $59.03 a barrel. The contract settled at $59.09 Monday on the New York Mercantile Exchange — the highest finish since Nov. 12, according to Dow Jones Market Data. The April WTI contract expires at the end of Wednesday's session.

May Brent crude LCOK9, +0.25% climbed by 7 cents, or 0.1%, to $67.61 a barrel on ICE Futures Europe, the highest for a front-month contract since November.

“Oil prices have risen by over 25% since the start of 2019 as output cuts by OPEC+ and involuntary cuts by Iran and Venezuela have prompted fears about supply,” said Caroline Bain, chief commodities economist with Capital Economics. “However, given our forecast of weak growth in demand, we think the oil market is still amply supplied.”

At a meeting on Monday, the OPEC/non-OPEC Joint Ministerial Monitoring Committee, a production policy monitoring group that includes Saudi Arabia and Russia, said that “overall conformity” with the production cut agreement that began at the start of the year rose to almost 90% in February, up from 83% in January.

OPEC members had agreed to trim 800,000 barrels a day from October's production levels for six months through June of this year, with Russia and other allied producers cutting another 400,000 barrels a day to total 1.2 million barrels in cuts.

OPEC-plus is not likely to decide whether to extend its oil-production cuts until June, closer to their scheduled expiration, Saudi energy minister Khalid al-Falih said Monday, according to S&P Global Platts . The coalition has already scheduled another meeting over June 25-26 in Vienna.

The market continues to weigh OPEC's words and actions compared with a strong U.S. impetus to pump.

Also on Monday, the Energy Information Administration said in a monthly report that oil production from seven major U.S. shale plays is forecast to climb by 85,000 barrels a day in April to 8.592 million barrels a day.

“Booming U.S. oil production has so far tamed any supply fears. In fact, the U.S. shale boom almost fully meets global oil demand growth mirrored by the strongly expanding crude oil exports,” said Norbert Rücker, head of economics and next generation research at Julius Baer.

“The latest data largely meets the oil market's expectations and shale production should continue reaching new record highs albeit at a somewhat slower pace.” he said. “Drilling activity has slowed as of late and is back to levels seen earlier last year. This stabilization, however, marks a much-needed respite and cools the business, which went too far into hyper-mode last year.”

Weekly U.S. petroleum supply data will be released Wednesday morning by the EIA. Trade group the American Petroleum Institute will issue its own figures late Tuesday.

Analysts polled by S&P Global Platts expect the EIA to reveal an increase of 1 million barrels in crude stockpiles for the week ended March 15. They also expect to see declines of 2.1 million barrels each for gasoline and distillate supplies.

Back on Nymex, April gasoline RBJ9, -0.08% rose 0.6% to $1.893 a gallon, while April heating oil HOJ9, -0.18%  rose 1.1% to $1.990 a gallon.

April natural gas NGJ19, -0.56%  settled at $2.874 per million British thermal units, up 0.8%.

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