SINGAPORE: Oil prices crept higher on Wednesday, supported by supply cuts by producer club OPEC and US sanctions against oil exporters Iran and Venezuela, but restricted by expectations that an economic slowdown could soon dent fuel consumption. International benchmark Brent futures were at $70.66 per barrel at 0158 GMT, up 5 cents from their last close.
US West Texas Intermediate (WTI) crude oil futures were at $64.10 per barrel, up 12 cents, or 0.2 percent, above their last settlement. Both benchmarks hit five-month highs on Tuesday, before easing on global growth worries.
Overall, oil markets have been tightened this year by US sanctions on oil exporters Iran and Venezuela, as well as supply cuts by the producer club of the Organization of the Petroleum Exporting Countries (OPEC) and some non-affiliated producers, a group known as OPEC+.
As a result, Brent and WTI crude oil futures have risen by around 30 percent and 40 percent respectively since the start of the year.
"The global oil market is clearly moving back towards balance thanks to OPEC+ production cuts. OPEC production has fallen 1.98 million barrels per day (bpd) from October levels," ING bank said in a note.
The Dutch bank said the reduction was not only down to voluntary supply cuts, which the group started this year to prop up prices.
"Venezuelan oil output is estimated to have fallen from 1.19 million bpd in October to 890,000 bpd in March, while output from Iran has fallen from 3.33 million bpd to 2.71 million bpd due to sanctions. Declines from these two exempt countries account for almost 47 percent of the reduction seen from OPEC," ING said. Despite the OPEC-led cuts, not all regions are in tight supply.
Oil production in the United States has risen by more than 2 million barrels per day since early 2018, to a record 12.2 million bpd.
"WTI has not seen the same strength (as Brent)... given the relatively more bearish fundamentals in the US market," said ING bank. "US crude oil inventories remain stubbornly high," it added.
US crude stocks rose by 4.1 million barrels in the week to April 5, to 455.8 million barrels, data from industry group the American Petroleum Institute showed on Tuesday. On the demand side, there are concerns that an economic slowdown will soon hit fuel consumption.
The International Monetary Fund (IMF) warned on Tuesday that the global economy was slowing more than expected and that a sharp downturn may be looming.
In its third downgrade since October, the IMF said the global economy will likely grow 3.3 percent this year, the slowest expansion since 2016. The forecast cut 0.2 percentage point from the IMF's outlook in January.
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