Oil prices on Tuesday reversed earlier losses after Saudi Arabia said a deal between producers to withhold output that has been in place since January could be extended beyond June to cover all of 2019.
The statements by Saudi energy minister Khalid Al-Falih came despite pressure by U.S. President Donald Trump to raise output to make up for a supply shortfall expected from tightening U.S. sanctions against Iran.
Brent crude futures were at $72.25 per barrel at 0701 GMT, up 21 cents, or 0.3 per cent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures were at $63.67 per barrel, up 17 cents, or 0.3 per cent, from their previous settlement.
Prices had come under downward pressure earlier on Tuesday after data on China’s factory activity weighed on financial markets, including crude oil futures, as it suggested Asia’s biggest economy is still struggling to regain traction.
Despite a shaky global economy, oil prices have surged by almost 40 per cent since January, lifted by supply cuts led by the Middle East-dominated producer club of the Organisation of the Petroleum Exporting Countries (OPEC) as well as by U.S. sanctions on producers Iran and Venezuela.
Matt Stanley, a broker with Starfuels in Dubai, said oil prices had risen this year due to the “choking” of supply rather than because of strong demand.
The Saudi statements appear to defy calls by Trump late last week for OPEC and its de-facto leader Saudi Arabia to raise output to meet the supply shortfall caused by the tightening Iran sanctions.
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. sanctions kick in and waivers eventually expire.”
In spite of this, the bank said it expected “a nearly balanced market in 2019” as output from OPEC and also the United States will rise.
French bank BNP Paribas said it expected oil prices “to rise in the near-term” as crude producers were “over-tightening the market in the face of unplanned supply outages and resilient oil demand”.
The bank said it expected crude markets to climb until the third quarter of 2019, adding that prices would then “start to become vulnerable to a sharp rise in U.S. exports of light crude thanks to pipeline and terminal capacity expansion”.
U.S. exports exceeded three million barrels per day (bpd) for the first time in early 2019 amid a more than two million bpd production 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 previous forecast, while Brent will average $71 per barrel, up to $3 from an earlier estimate.
“In 2020, we see WTI averaging $64 per barrel and Brent $68 per barrel,” the bank said.