Oil prices rose early on Tuesday to their highest level this month, supported by the Saudi pledge to continue cutting deeper and a blackout in Venezuela that disrupted its oil production and exports.
At 10:42 a.m. EDT on Tuesday, WTI Crude was up 1.27 percent at $57.51 and Brent Crude was trading up 0.92 percent at $67.19. Both benchmarks were trading at their highest levels so far in March.
On Monday, OPEC’s de facto leader and largest producer, Saudi Arabia, signaled that it is determined to do ‘whatever it takes’ to rebalance the market and support oil prices by keeping its April crude oil exports at below 7 million bpd, despite requests for more than 7.6 million bpd of Saudi oil from its customers. The lower allocations by Saudi Aramco for April will also mean that the Kingdom’s oil production will be “well below 10 million bpd” in April, a Saudi official told Reuters.
The Saudi reminder to the market that it would continue to overachieve in its share of the cuts sent oil prices higher on Monday when prices were also supported by another massive involuntary curtailment of production and exports in Venezuela.
A major power blackout in Venezuela, the country which holds the world’s largest oil reserves, has shut down oil production and processing operations as well as the main export terminal. This has disrupted oil exports from the South American giant whose shipments are already lower due to the U.S. sanctions and the country’s continuously declining production over the past three years.
The sanctions on Venezuela, OPEC’s cuts, and the U.S. sanctions on Iran have been curtailing mostly heavy and medium crude grades supply, and as a result, the prices of sour and heavy grades from other countries have been rising. For example, the discount of Mars US to Louisiana Light has narrowed to its smallest since 2011, according to Bloomberg data, while Western Canadian Select (WCS)—the benchmark price of oil from Canada’s oil sands—was valued at $3.75 a barrel above WTI for delivery in April at Nederland, Texas, people familiar with the matter told Bloomberg.
By Tsventana Paraskova for Oilprice.com
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