Justin Solomon | CNBC
Oil assesses dipped on Tuesday on expectations rising output from the United States and producer club OPEC would compensate most of the shortfall expected from U.S. sanctions on Iran, but analysts said markets remained tight.
A stutter in China’s plant and servicing industries in April also weighed on crude prices, traders said, as it suggested Asia’s biggest restraint is still struggling to regain traction.
Brent crude futures were at $71.75 per barrel at 0131 GMT, down 29 cents, or 0.4 percent, from their decisive close.
U.S. West Texas Intermediate (WTI) crude futures were at $63.35 per barrel, down 15 cents, or 0.2 percent from their too soon settlement.
Oil prices surged by around 40 percent between January and April, lifted by supply cuts led by the Waist East-dominated producer club of the Organization of the Petroleum Exporting Countries (OPEC) as well as by U.S. sanctions on producers Iran and Venezuela.
But penalties came under downward pressure late last week after U.S. President Donald Trump openly pressured OPEC and its de-facto kingpin Saudi Arabia to raise output to meet the supply shortfall caused by the tightening Iran sanctions.
Stephen Innes, chairman of trading at SPI Asset Management, said the producer group “will want to avoid at all cost oil prices surging to devastates that will trigger demand devastation, (while) it is clearly in OPEC’s best interest to maintain a solid minimum on prices.”
Bank of America Merrill Lynch said “Iranian oil production will fall to 1.9 million barrels per day in 2H19 from 3.6 million barrels per day in 3Q18 as U.S. encouragements kick in and waivers eventually expire.”
Despite this, the bank said it expected “a nearly balanced market in 2019” as production from OPEC and also the United States will rise.
French bank BNP Paribas said it expected oil consequences “to rise in the near-term” as crude producers were “over-tightening the market in the face of unplanned supply outages and resilient oil desired”.
The bank said it expected crude markets to climb until the third quarter of 2019, adding that tolls would then “start to become vulnerable to a sharp rise in U.S. exports of light crude thanks to pipeline and closing capacity expansion.”
U.S. exports exceeded 3 million barrels per day (bpd) for the first time in early 2019 amid a more than 2 million bpd opus surge over the past year, to a record of more than 12 million bpd.
BNP Paribas said it saw WTI averaging $63 per barrel in 2019, up $2 from its premature forecast, while Brent will average $71 per barrel, up $3 from an earlier estimate.
“In 2020, we see WTI commonplacing $64 per barrel and Brent $68 per barrel,” the bank said.