Brent crude crosses $79 as supply concerns deepen

Brent crude prices rose above $79 on Tuesday as supply concerns linger amid dwindling Venezuelan production, tensions in Libya and the US push to reduce Iranian exports.

Global benchmark Brent crude was last trading up 1.2 percent at $79.02 per barrel (bbl), while WTI crude rose 0.6 percent to $74.31/bbl.

“The rally has been motivated by fears of a global supply shortfall due to declining production in Venezuela, Libya and potentially in Iran amid limited spare global production capacity,” National Bank of Kuwait said in a recent report on oil markets.

Disruptions in Canada – where Suncor Energy Inc. is working to bring its Syncrude oil-sands operation back online after a transformer trip cut power to the plant last month – also added to the upside pressure on the prices.

Meanwhile, threats of interruption in output also surfaced in Norway as several workers on Norwegian oil and gas offshore rigs went on strike after rejecting a proposed wage deal.

However, Equinor, the country’s largest operator of offshore oil and gas platforms, the strike was not disrupting production, Reuters reported.

A combination of geopolitical supply-side risks, a potential supply crunch, as well as the risk of OPEC+ reneging on their compliance adherence, is all creating a “perfect storm,” which is positive for near-term oil prices, Japanese bank MUFG said in a note on Tuesday.

The bank expects Brent and WTI to rise above $85/bbl and $80/bbl, respectively, in Q3 2018.

The oil market has also been in focus with US President Donald Trump asking OPEC to help lower prices.

On Monday, OPEC President Suhail Al Mazrouei said the cartel was doing its part to ensure market balance, but it “alone cannot be blamed for all the problems that are happening in the oil industry.”

Mazrouei also said that OPEC is willing to listen to major oil-producing countries, including the United States.

Write to Nadeshda Zareen at nadeshda.zareen@argaamplus.com