Oil prices slip, but supply cuts support

LONDON - 18 April 2019: Oil prices eased on Thursday, although a decline in U.S. inventories, ongoing supply cuts from OPEC and its allies, and U.S. sanctions on Venezuela and Iran all limited losses.

Brent crude futures were at $71.49 a barrel at 0943 GMT, down 13 cents from their last close and further away from Wednesday’s five-month high of $72.27 a barrel.

U.S. West Texas Intermediate (WTI) crude futures were at $63.71 per barrel, down 5 cents.

Both contracts traded slightly higher earlier in the day.

U.S. crude inventories fell by 1.4 million barrels in the week to April 12, U.S. Energy Information Administration (EIA) data showed on Wednesday.

The fall in oil prices came “despite a small w-o-w (week on week) draw on U.S. crude inventories as observed in the latest EIA data, partly since imports slumped back toward the 6 million barrel per day mark while implied crude supply numbers remain firm,” Vienna-based consultancy JBC Energy said.

Gasoline stocks fell by 1.2 million barrels, and distillate stocks, which include diesel and heating oil, fell by 362,000 barrels, the EIA data showed.

Prices have been supported this year by an agreement reached by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, to limit their oil output by 1.2 million barrels per day (bpd).

Global supply has been tightened further by U.S. sanctions on OPEC members Venezuela and Iran.

Iran’s crude exports have dropped in April to their lowest daily level this year, tanker data showed and industry sources said, suggesting a reduction in buyer interest ahead of expected further pressure from Washington.

Indian refiners are turning to other OPEC members, Mexico and the United States to make up for any loss of Iranian oil.

Spain’s Repsol has suspended its swaps of refined products for crude with Venezuela’s state-run oil company PDVSA, people familiar with the matter said, as U.S. officials weigh penalties for foreign firms doing business with Venezuela.

Growing U.S. oil production and concerns over the U.S.- China trade dispute are keeping prices in check.

U.S. crude oil output from seven major shale formations was expected to rise by about 80,000 bpd in May to a record 8.46 million bpd, the EIA said in its monthly report on Monday.

Surging U.S. production has filled some of the gap in supplies, although not all of the lost production can be immediately replaced by U.S. shale oil due to refinery configurations.