Oil rises as supply constraints outweigh China slowdown fears

A pump jack stands at dusk in the Permian Basin area in Texas U.S. Bloomberg  Angus Mordant

West Texas Intermediate (WTI) crude rose by 46 cents or 0.4 per cent to settle at $63.84 a barrel.

Production cuts from the Organization of Petroleum Exporting Countries (OPEC), in addition to supply risks from Iran, Venezuela and Libya continue to pressure global oil supply and keep oil prices high at Friday's opening.

IEA said Thursday that worldwide crude inventories are set to decline for the rest of the year as OPEC output falls.

Crude futures rose again on Friday, heading for a sixth-straight week of gains, as threats of a wipeout in Libyan crude supply bolstered an already squeezed market.

"Clearly, oil prices at $70/bbl for Brent, are less comfortable for consumers than they were at the start of the year and the IEA has regularly warned of the dangers of prices rising even higher".

"We believe global demand has another 10 million barrels bpd of growth, with over half from China", Bernstein Energy said in a note on Thursday.

In its April report the IEA maintained its forecast for oil demand growth in 2019 at 1.4 million barrels per day.

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Current oil demand stands around 100 million bpd. Demand is expected to grow by 1.4 percent per day.

Saudi Arabia's crude output fell 289,000 bpd in March to average 9.79 million bpd, according to an average of the six secondary sources that OPEC uses to gauge production.

With this decline in production, which according to official records is due to a natural decline from the depletion of some wells and the lack of investment in the prospecting, surveying and exploration segments in the last ten years, Nigeria has moved ahead and consolidated its position as the main producer in Africa.

OPEC and its allies meet in June to decide whether to continue withholding supply.

"Crude oil production has not been affected so far and if we can not reduce the Libyan risk to zero, we go into this weekend with a lower risk premium for Libya than a week ago", said Olivier Jakob at PetroMatrix in Zug, Switzerland.

In 2018 OPEC+ made a decision to increase output at its mid-year meeting, only to return to production cuts in 2019.

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