Oil prices firm on supply cuts, but slowing economy drags

Oil prices edged up on Wednesday, supported by ongoing supply cuts led by producer club OPEC and U.S. sanctions against Iran and Venezuela, although gains were limited by concerns over economic growth.

International Brent crude oil futures were at $67.79 a barrel at 0752 GMT, up 18 cents, or 0.3 percent, from their last close. Brent on Tuesday touched its highest since Nov. 16 at $68.20 a barrel.

U.S. West Texas Intermediate (WTI) crude futures were at $59.09 per barrel, up 6 cents, or 0.1 percent, from their previous settlement. WTI on Tuesday reached its highest level since Nov. 12 at $59.57 a barrel.

Crude prices have risen by almost a third this year, pushed up by a move led by the Organization of the Petroleum Exporting Countries (OPEC) to withhold around 1.2 million barrels per day (bpd) of supply as well as by U.S. sanctions against oil exporters Iran and Venezuela.

“The shaky supply outlook with regard to Venezuela and Iran, as well as the petro-nations’ output restrictions are top of mind in the oil market,” said Norbert Ruecker, head of economics at Swiss bank Julius Baer.

Analysts said an economic slowdown could soon dent fuel consumption, holding back crude somewhat.

“Global growth concerns and ongoing oversupply fears (are) creating headwinds for the commodity,” said Lukman Otunuga, analyst at futures brokerage FXTM.

Asian business confidence held near three-year lows in the first quarter as a U.S.-China trade dispute dragged on, pulling down a global economy that is already on a downward path, a Thomson Reuters/INSEAD survey found on Wednesday.

Ruecker said oil prices were likely capped around $70 per barrel as fuel price inflation, as seen last year, would hit demand at that level.

At the same time, he said oil prices were supported above $50 per barrel as investment into U.S. shale output growth would cease below that price.

Between those price levels, Ruecker said “the U.S. shale boom almost fully meets global oil demand growth mirrored by the strongly expanding crude oil exports,” which hit a record 3.6 million bpd in February.

“We see … roughly 1.2 million bpd of U.S. shale oil growth over the coming year,” Ruecker said, which is in line with most global oil demand growth forecasts of 1 million to 1.3 million barrels per day for 2019.

U.S. crude, gasoline and distillate inventories unexpectedly fell in the week to March 15, industry group the American Petroleum Institute said on Tuesday.

The U.S. Energy Information Administration (EIA) is due to publish its weekly crude production and storage level report around 1700 GMT on Wednesday.

“A surprise draw in crude oil inventories … could lift (WTI) crude towards the elusive $60 per barrel. A level that hasn’t been breached so far this year,” said Jasper Lawler, head of research at futures brokerage London Capital Group.

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