Singapore — Crude oil futures remained supported during mid-afternoon trade Friday on the back of tighter supply on the OPEC-led production cuts coupled with supply disruptions from Venezuela and Iran as a result of the US sanctions.
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Furthermore, lower oil and gas rig counts in the US also helped buoy sentiment.
At 2:35 pm Singapore time (0635 GMT), the June ICE Brent crude futures were up 27 cents/b (0.38%) from Thursday's settle at $71.10/b, while the NYMEX May light sweet crude contract also gained 29 cents/b (0.46%) at $63.87/b.
"Global oil supply dropped in March as US sanctions and power outages pushed Venezuela's crude output to a long-term low of 870,000 b/d," Trifecta Consultants' director Sukrit Vijayakar said Friday.
Global supply dropped 340,000 b/d in March due to the OPEC-led production cut deal and a sharp drop in output at sanctions-hit Venezuela, the IEA said earlier in the week.
The agency estimated that OPEC production in March fell 550,000 b/d to 30.10 million b/d as Saudi Arabia's output fell to its lowest level in two years, boosting compliance with supply cuts to 153%.
"While oil prices should remain bid on dips since the market is tight and there's a strong possibility that output from either Iran or Venezuela could drop further. But for the oil bulls, $75/b Brent may be a bridge too far unless of course there was a catastrophic supply shock from Libya," SPI Asset Management's head of trading and market strategy Stephen Innes said.
"On the demand side of the equation, there are still some concerns about weaker demand in Europe, but these fears should be offset by China's demand growth. While it's very unlikely prices will fall off a cliff, the raging bull market will probably pause until the next catalyst emerges," Innes added.
The IEA kept its estimates for global oil demand growth unchanged at 1.30 million b/d last year and 1.40 million b/d in 2019, but warned "risks are currently to the downside."
"Tightness in the oil market, however, is not just a supply story," IEA said. "In recent months, the resilience of demand has received less attention than the vicissitudes of production, but it is very important, too."
Meanwhile, lower rig counts in the US also contributed to higher crude prices.
The US oil and gas rig count dropped by eight on the week ending Wednesday to 1,090, resuming a five-month general downward creep even as oil prices remain in the low $60s/b, according to S&P Global Platts Analytics.
Oil rigs dropped by 10 to 867, while gas-directed rigs were up by one to 220, Platts reported.
As of 0635 GMT, the US Dollar Index was 0.2% lower at 96.64.
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