Oil prices rose slightly Thursday on OPEC supply cuts as well as US sanctions on crude from Iran and Venezuela, however, gains were capped by falling stock markets and concerns about weakening demand growth.  BP photo.

Oil prices boosted by strong demand for refined products

Oil prices rose slightly on Thursday, buoyed by OPEC supply cuts and US sanctions against Venezuelan and Iranian crude exports.  However, concerns about the European economy impacted stock markets and capped oil price gains.

By 2:08 p.m., EST, benchmark Brent crude futures were up 26 cents to $66.25/barrel and US West Texas Intermediate edged up 32 cents to $56.54/barrel.

“The big picture is that short-term fundamentals are very strong,” Phil Flynn, analyst at Price Futures Group told Reuters. “There’s still some nervousness about supply.”

At the beginning of January, OPEC along with its allies, including Russia, teamed on a supply cut agreement in an effort to cut excess crude supply.  The move has helped boost oil prices about 20 per cent since the start of the year.

The Trump administration’s sanctions against Iran and Venezuela have also had an impact on futures, according to traders.

This week, Venezuela’s state-run oil company, PDVSA, declared a maritime emergency.  The company said it is having trouble accessing tankers and personnel to export its crude due to the sanctions.

In November, the Trump administration imposed sanctions against Iranian crude exports, however, a number of waivers were granted to eight countries which allowed them to purchase limited quantities of oil from Iran for another 180 days.

Since then, Washington has pressured these governments to gradually cut their purchases of Iranian crude to zero.  Importers remain in talks with the US over possible extensions to the waivers.

India says it would like to continue to purchase 300,000 barrels per day of Iranian crude and is looking for an extension of the waiver to the sanctions, according to two Reuters sources.

Oil prices were also supported by strong demand for refined products.  The US Energy Information Administration reported on Wednesday that US gasoline stocks fell by 4.2 million barrels last week on low refinery rates.

Prices were pressured by concerns over Europe’s economy which pushed Wall Street lower and fed concerns about faltering global oil demand.

To boost the struggling euro zone economy, the European Central Bank said on Thursday that it will hold off increasing rates until next year at the earliest.  The ECB also offered banks new rounds of multi-year cash.

“There’s a lot of concerns about the European economy,” Flynn told Reuters. “Because (ECB President Mario Draghi) sounded a little downbeat on growth, we saw a big selloff in stocks and oil went down in sympathy with that move.”

As well, rising US oil production which hit 12.1 million barrels per day, also impacted oil prices.