Oil prices edge up on supply disruption worries

Singapore Published: Aug 28, 2018, 08:17 AM(IST)

File photo. Photograph:( Reuters )

Oil prices rose on Tuesday as risks of supply disruptions from places such as Venezuela, Africa and Iran triggered expectations of a tightening market.

International Brent crude oil futures were at $76.37 per barrel at 0215 GMT, up 16 cents, or 0.2 per cent, from their last close.

US West Texas Intermediate (WTI) crude futures were up 9 cents, or 0.1 per cent, at $68.96 a barrel.

Despite some concerns about an economic slowdown because of the US-China trade conflict, crude supplies are relatively tight due to disruptions as well as voluntary restraints on output by the Organization of the Petroleum Exporting Countries (OPEC).

The cartel's monitoring committee found that oil producers participating in a supply-reduction agreement, which includes non-OPEC member Russia, cut output in July by 9 per cent more than called for.

The findings for last month compare with a compliance level of 120 per cent for June and 147 per cent for May, meaning participants have been steadily increasing production.

OPEC and its allies agreed in late 2016 to cut output from 2017 by around 1.8 million barrels per day (bpd) versus October 2016 levels.

The International Energy Agency (IEA) on Monday also warned of further supply disruptions, especially from Venezuela, where an economic crisis has cut deep into the OPEC-member's oil output.

Venezuelan crude oil exports have halved in the previous two years to just 1 million bpd by mid-2018, according to trade flow data.

"We can expect a further fall," the IEA's Executive Director Fatih Birol told Reuters in Norway on Monday.

Birol also warned that African OPEC-members Libya and Nigeria "seem both still fragile countries" despite some recent improvements.

Birol said it was too early to gauge the impact of the US sanctions that will target Iran from November.

Beyond a relatively tight supply outlook, analysts said a fall in the dollar over the past two weeks was also supporting crude, as it makes oil purchases cheaper for countries using other currencies at home.

"The weaker US-dollar helped commodities in general," said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

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