Oil Prices Increase as US Lowers Crude Production Estimates

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Oil prices rose yesterday, driven by OPEC's current production restrictions and U.S. sanctions against Iran and Venezuela.

Global benchmark Brent crude was trading at $66.94 per barrel at 0708 GMT with a 0.2 percent gain, after it closed Tuesday at $66.81 a barrel.

US West Texas Intermediate (WTI) crude futures were at $58.29 per barrel, up 3 cents, or 0.1 percent, from their last settlement.

The Organisation of the Petroleum Exporting Countries (OPEC) and some non-aligned producers including Russian Federation have been withholding oil supply since the start of the year to tighten global markets.

Another influence for traders was US sanctions against oil exports from Iran and Venezuela said to be contributing to the tightening: Barclays noted that "Failures in [Venezuela's] electrical system". Back in February, U.S. crude-oil futures posted their highest close in over three months, and recently prices have now surpassed a 4-month high.

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This increase in price was mainly attributed to an announcement from the Energy Information Administration on Wednesday, reporting that US crude supplies fell by around 3.9 million barrels last week. Meanwhile, distillates stockpiles unexpectedly increased by 0.38 million barrels.

Forecasts slowed U.S. production to a record of 13 million barrels per day (bps) until the third quarter of 2020, instead of the second quarter of previous forecasts. The report said rising production outside the group pressed the need for continued supply restraint by OPEC+. According to the U.S. Energy Information Administration, U.S. commercial crude inventories fell last week as refineries hiked output.

For 2020, the government said it expected USA crude oil demand to rise by 220,000 bpd to 21.03 million bpd, unchanged from previous forecasts.

WTI has been recovering from the recent lows below the 55 handle scored earlier this month and has been knocking on the door of a critical technical level around recent highs en route to test territory in the mid 58 handle and highest levels since mid-November. Additionally, the American Petroleum Institute went on to say on Tuesday that there had been a 2.6-million-barrel decline, so the markets were surprised when the EIA reported a significantly higher figure. The increase in refinery output of petroleum products has outpaced the increase in USA consumption of petroleum products such as distillate fuel oil, gasoline, and propane, leading to an increase in exports.

Crude oil production in the country also fell by 106,000 barrels per day (bpd) to around 12 million bpd, the data showed.