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

Comments from Riyadh come despite US pressure to raise output

SINGAPORE/LONDON: 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 after Saudi Arabia said a deal between producers to curb output could be extended beyond June to the end of 2019.

The situation in Venezuela, an OPEC member whose oil exports have been hit by US sanctions and an economic crisis, was fluid on Tuesday. The government promptly dismissed any suggestion of a military insurrection.

Comments from Saudi Arabia 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," said analyst Olivier Jakob at Petromatrix.

Brent crude futures rose to $73.08 per barrel by 1143 GMT, up 1.44% from their last close. US crude futures were at $64.42, up 1.45%.

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.

Despite a shaky global economy, oil has surged almost 40% since January, lifted by supply cuts led by the Organisation of the Petroleum Exporting Countries (OPEC).

Matt Stanley, a broker with Starfuels in Dubai, said oil prices had risen this year due to the "choking" of supply rather than strong demand.

Tighter sanctions

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 that OPEC raise output.

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".