Oil tops $73 on Venezuela turmoil, Saudi support for OPEC cuts

Oil prices topped $73 on Tuesday as Venezuela’s opposition leader called on the military to back him to end Nicolas Maduro’s rule and Saudi Arabia said a deal between producers to curb output could be extended to the end of 2019.

The government in Venezuela, an OPEC member whose oil exports have been hit by US sanctions and an economic crisis, dismissed any suggestion of an insurrection.

The Saudi comments, by Energy Minister Khalid al-Falih, came despite pressure from US President Donald Trump to raise output to make up for a supply shortfall expected from tightening US sanctions against Iran.

“There was an uptick even without Venezuela due to Falih’s comments,” analyst Olivier Jakob at Petromatrix said.

Brent crude futures hit a session high of $73.27 per barrel and traded 84 cents higher at $72.88 a barrel by 1335 GMT, while US crude futures were at $64.32, up 63 cents a barrel.

Falih’s comments, made to Russian state news agency RIA, suggested Saudi Arabia would want to maintain some form of production cut despite Trump’s demand.

A Reuters survey of OPEC oil supply found production from the group hit a four-year low in April of 30.23 million barrels per day (bpd) due to further involuntary declines in Iran and Venezuela and continued Saudi output restraint.

The existing deal involves a cut by the Organization of the Petroleum Exporting Countries and other allies led by Russia of around 1.2 million bpd until the end of June.

OPEC and its allies meet in Vienna on June 25-26 to decide on the next steps.

Brent hit a six-month high above $75 last week because of tightening global markets amid US sanctions on Iran and Venezuela coupled with Russian oil export problems stemming from a contaminated pipeline.

Belarus said on Tuesday that months of work would be needed to restore clean oil supplies via the Druzhba pipeline after Western oil consumers suspended imports of Urals crude due to contamination.

Druzhba can pump up to 1 million barrels bpd, amounting to 1 percent of global crude demand.

Bank of America Merrill Lynch said “Iranian oil production will fall to 1.9 million barrels per day in 2H19 from 3.6 million barrels per day in 3Q18 as US sanctions kick in and waivers eventually expire”.

Despite this, the bank said it expected “a nearly balanced market in 2019” as output from OPEC and the United States rises.

French bank BNP Paribas said it expected oil prices “to rise in the near term” as crude producers were “over-tightening the market in the face of unplanned supply outages and resilient oil demand”.