WTI, Brent End Tuesday at 2019 Highs

WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange nearest delivered oil futures and Brent on the Intercontinental Exchange continued higher Tuesday, with both West Texas Intermediate and Brent reaching fresh 2019 highs, fueled by bullish market sentiment on supply-side tightness.

WTI May contract gained $0.99 to settle at $62.58 barrels (bbl), the highest price point since early November, while ICE Brent June futures advanced $0.36 to $69.37 bbl, holding just below the $70.00 mark. Nymex ULSD May contract settled 2.08 cents higher at $2.0089 gallon, while RBOB May futures shifted 2.96 cents higher to $1.9285 gallon.

Oil futures reached new 2019 highs Tuesday, as production from Organization of the Petroleum Exporting Countries plunged to the lowest level in four years last month, pointing to an increasingly tightening global oil market.

According to media surveys, Saudi Arabia decreased output by 220,000 barrels per day (bpd) in March to the lowest level since February 2015, cutting by more than double the amount pledged under Vienna's agreement. OPEC reached 135% compliance with the pledged cuts last month, despite lagging performance from several members, namely Iraq and Nigeria. Along with aggressive cuts from Saudi Arabia, involuntary production losses in Venezuela further exerted upward pressure on prices. A Reuters' survey showed crude oil output in Venezuela reached a 16-year low in March, and the market's outlook for OPEC's troubled member remains negative in the short-to-medium term.

Oil futures were also boosted by news the Trump administration is considering additional sanctions against Iran that would target new areas of the economy and exports. White House officials close to the matter said the fresh round of sanctions would likely be imposed close to the May 8 anniversary of the U.S. withdrawal from the 2015 nuclear deal with Iran.

Energy Information Administration estimated Iranian oil exports have declined by more than 1 million bpd since sanctions took effect, even as the United States granted waivers to eight Iranian oil buyers in the fourth quarter 2018.

The news broke amidst Iranian Energy Minister Bijan Zanganesh's visit to Russia where he met with Russian counterpart Alexander Novak to discuss a potential extension of OPEC+ agreement beyond June 30. Upon conclusion of the meeting, the Iranian official said there would be "no difficulty" extending agreement, citing a common understanding of the market situation.

Domestically, markets now await the weekly rundown of supply data in the U.S. inventory levels, with the market consensus calling for a 750,000 bbl decline in crude stocks during the week-ended March 29. The draw, if confirmed by EIA data due for release 10:30 a.m. ET Wednesday, would again pare back an inventory deficit to the five-year average, which has narrowed since early March, to about 1.6% from 1.8% the week before.

Market followers estimate stock levels for gasoline and distillate fuel were also drawn down during the final week of March, with gasoline inventory expected to have fallen 1.5 million bbl during the week profiled and distillate stocks to have declined by 500,000 bbl.

Data from the EIA shows commercial crude stocks totaled 442.3 million bbl on March 22, 12.3 million bbl or 2.9% above year ago. EIA data shows gasoline inventory has been drawn down for six consecutive weeks through March 22, with supply at a 238.6 million bbl 12-week low. Distillate stocks have declined for six straight weeks in ending the first quarter that has lowered inventory to a 2019 low at 130.2 million bbl.

The American Petroleum Institute will release its weekly report at 4:30 p.m. ET.

Liubov Georges can be reached at liubov.georges@dtn.com