Oil prices hit new 2019 highs on OPEC output cuts, US sanctions

Oil prices struck new 2019 highs on Tuesday, supported by supply cuts led by producer club OPEC.

U.S. sanctions against oil producers Iran and Venezuela are also boosting prices, although traders said the market may be capped by rising American output.

futures were up 20 cents at $67.74 per barrel around 7:20 a.m. ET (1320 GMT). The international benchmark for oil prices rose to its highest level since Nov. 16 earlier in the session.

U.S. futures were at $59.49 per barrel, up 40 cents from their last settlement. WTI also hit an intraday peak going back to Nov. 12.

In China, Shanghai crude futures, launched in March last year, bounced 4.5 percent from their last close to 468.2 yuan ($69.71) per barrel, also near 2019 highs of 475.7 yuan a barrel hit during a brief spike in February.

In dollar-terms, this pushed Shanghai crude into a premium over Brent.

OPEC on Monday , 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.

Because of the tighter supply outlook for the coming months, the Brent forward curve has gone into backwardation since the start of the year, meaning that prices for immediate delivery are more expensive than those for dispatch further in the future, with May Brent prices currently around $1.20 per barrel more expensive than December delivery Brent.