Oil prices were around 2019 highs on Wednesday, propped up by supply cuts led by producer club OPEC and by U.S. sanctions on Iran and Venezuela.
But soaring U.S. production and expectations of an economic slowdown look set to cap prices, analysts said.
U.S. West Texas Intermediate (WTI) crude oil futures hit 2019 highs of $56.39 per barrel shortly after 0300 GMT on Wednesday, up 30 cents, or 0.5 percent, from their last settlement.
International Brent crude futures were at $66.58 per barrel, up 13 cents, or 0.2 percent, from their last close and not far off their 2019 high of $66.83 per barrel from Monday.
Oil prices have been supported by supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC).
OPEC-member and top crude exporter Saudi Arabia is expected to reduce shipments of light crude oil to Asia in March as part of the effort to tighten markets.
OPEC as well as some non-affiliated producers such as Russia agreed late last year to cut output by 1.2 million barrels per day (bpd) to prevent a large supply overhang from swelling.
“We have lowered Saudi crude oil output in line with announcements … (and) are now assuming that Saudi Arabia will produce in the first three quarters of 2019 less than the 10.31 million bpd target it agreed to at the Dec. 7 OPEC, non-OPEC meeting,” French bank BNP Paribas said in a note.
Another key oil price driver has been U.S. sanctions on oil exporters Iran and Venezuela.
Despite the sanctions, Iran’s crude exports were higher than expected in January, averaging around 1.25 million bpd, according to Refinitiv ship tracking data. Many analysts had expected Iran oil exports to drop below 1 million bpd after the imposition of U.S. sanctions last November.
Standing against the supply cuts and sanctions is U.S. crude output, which soared by more than 2 million bpd in 2018 to a record 11.9 million bpd, thanks to booming shale oil production, which the Energy Information Administration on Tuesday said was expected to keep rising.
Commenting on the market performance, global head of commodity markets strategy at BNP Paribas, Harry Tchilinguirian, told Reuters, that, “The market is slowly regaining its bullish footing, subject to the perception of economic risks tied to U.S.-China trade talks.”