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Brent oil hits four-month high on OPEC cuts, sanctions against Venezuela and Iran

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SINGAPORE – Oil prices rose on Thursday, with Brent crude hitting its highest since November 2018 amid OPEC-led supply cuts and U.S. sanctions on Venezuela and Iran, while Chinese demand remained strong despite an economic slowdown.

An unexpected dip in U.S. crude oil inventories and production also supported prices, traders said.

Brent crude oil futures marked a 2019-peak of $67.84 per barrel on Thursday, and were still at $67.78 per barrel at 0755 GMT, up 23 cents, or 0.3 percent from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $58.42 per barrel, up 16 cents, or 0.3 percent, from their last settlement, and also close to a November-2018 high of $58.48 per barrel reached the previous day.

“With OPEC’s cuts in full-swing … persistent supply issues and a deteriorating picture on Venezuela, oil is looking well supported,” said Jasper Lawler, head of research at futures brokerage London Capital Group.

The Organization of the Petroleum Exporting Countries (OPEC) and some non-aligned producers including Russia have been withholding oil supply since the start of the year to tighten global markets and prop up crude prices.

In Venezuela, oil production and exports have been disrupted by a political and economic crisis that has caused massive blackouts and supply shortages, while Washington has barred U.S. companies from doing business with the Venezuelan government, including state-owned oil firm PDVSA.

Amid the turmoil, two storage tanks exploded at a heavy-crude upgrading project in eastern Venezuela on Wednesday, according to an oil industry source and a legislator.

In the Middle East, the United States aims to cut Iran’s crude exports by about 20 percent to below 1 million barrels per day (bpd) from May by requiring importing countries to reduce purchases to avoid U.S. sanctions, two sources familiar with the matter told Reuters.

Meanwhile, a weekly report by the U.S. Energy Information Administration (EIA) said U.S. commercial crude oil inventories fell last week as refineries hiked output.

Crude inventories dropped by 3.9 million barrels in the last week, to 449.07 million barrels, compared with analyst expectations for an increase of 2.7 million barrels.

U.S. crude oil production also dipped, falling by 100,000 barrels per day (bpd) to 12 million bpd.

In China, refinery crude oil use hit a record 12.68 million bpd in the first two months of the year, up 6.1 percent versus the same time last year, official data showed on Thursday, as new privately-owned refiners started up their processing facilities.

Despite this record consumption from the world’s top crude importer, oil prices could also come under downward pressure from an economic slowdown.

Growth in China’s industrial output fell to a 17-year low of 5.3 percent in the first two months of the year, official data showed on Thursday, pointing to further weakness in the world’s second-biggest economy.

Reuters

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