Oil prices hovered just below 2019 highs early on Tuesday, supported by ongoing supply cuts led by producer club OPEC.
U.S. sanctions against oil producers Iran and Venezuela are also boosting crude prices, although traders say the market looks capped by rising American output.
U.S. West Texas Intermediate (WTI) futures were at $59.08 per barrel at 0152 GMT, virtually unchanged from their last settlement and close to the 2019 high of $59.23 reached the previous day.
Brent crude oil futures were up 2 cents at $67.56 per barrel, within a dollar of this year’s high of $68.14 reached late last week.
In China, Shanghai crude futures, launched in March last year, bounced 4.5 percent from their last close to 469.2 yuan ($69.92) per barrel, also near 2019 highs of 475.7 yuan a barrel reached during a brief spike in February.
In dollar-terms, this pushed Shanghai crude into a premium over Brent.
The Organization of the Petroleum Exporting Countries (OPEC) on Monday scrapped its planned meeting in April, effectively extending supply cuts that have been in place since January until at least June, when the next meeting is scheduled.
OPEC and a group of non-affiliated producers including Russia, known as OPEC+, started withholding supply to halt a sharp price drop in the second half of 2018, when markets came under pressure from surging output as well as an economic slowdown.
“The OPEC+ deal has brought stability to crude prices and signs of an extension have taken crude higher,” said Alfonso Esparza, senior market analyst at futures brokerage OANDA.
Prices have been further supported by U.S. sanctions against oil exports from Iran and Venezuela, traders said.
“The ball is now on the U.S. production side with the weekly crude inventories an upcoming indicator to be taken into consideration when it’s released on Wednesday,” he added.
U.S. crude oil output has soared by more than 2 million barrels per day (bpd) since early 2018, to around 12 million bpd, making America the world’s biggest producer ahead of Russia and Saudi Arabia.
Weekly production and storage data is due to be published by the U.S. Energy Information Administration (EIA) on Wednesday.
On the demand-side, there is concern that an economic slowdown as well as improving energy efficiency and the emergence of alternative transport fuels will erode oil consumption.
Bank of America Merrill Lynch said in a note that economic “risks are skewed to the downside” and that “we forecast global demand growth of 1.2 million bpd year-on-year in 2019 and 1.15 million bpd during 2020.”
The bank said it expected “Brent and WTI to average $70 per barrel and $59 per barrel respectively in 2019, and $65 per barrel and $60 per barrel in 2020.”