Oil falls as US maintains record output, inventories climb

Oil falls as US maintains record output, inventories climb

Oil facilities are seen on Lake Maracaibo in Cabimas, Venezuela January 29, 2019.

Brent for April settlement dropped 19 cents to $62.50 a barrel on the London-based ICE Futures Europe exchange, after adding 71 cents on Wednesday.

During the remainder of Q1 2019, the capital company expects a gradual lift in prices as OPEC data confirm compliance to the agreement and OECD oil stocks begin to fall to lower than the five-year average.

Weighing on oil markets, USA government data showed new orders for US -made goods unexpectedly fell in November, with sharp declines in demand for machinery and electrical equipment.

Benchmark Brent crude slipped 21 cents to $61.77 USA a barrel mid-morning Wednesday, after rallying about 15% in January.

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Moreover, supply cuts by the Organization of the Petroleum Exporting Countries and its allies, including Russian Federation, have been supporting prices.

The producers known as OPEC+ began cutting production from last month to avert a new supply glut and OPEC has delivered nearly three-quarters of its pledged cutback already, according to a Reuters survey.

"Distillate demand increased sharply last week due to the extreme cold weather, which contributed to the declining distillate stocks", Commerzbank analyst Carsten Fritsch said. The EIA noted that, eventually, the full effects of USA sanctions will eventually eliminate imports from the Caribbean country, although the agency "does not anticipate any significant decrease in USA refinery runs as a result of these sanctions". Also supporting the market is concern that a Venezuelan crisis - and sanctions announced recently - could cause a collapse of the 1.15 million crude oil per day production of Venezuela. “The plus side for USA producers is that they get the higher price benefit without cutting their own production.”.

"Despite several forays in WTI above our prior resistance of $55, the market continues to draft back down largely under the pressure of this week's stronger dollar", Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

Concern about weaker global economic growth and the trade dispute between the United States and China have also weighed on sentiment. -China trade dispute. Oil prices fell on Tuesday after a survey showed euro zone business expansion almost stalled in January. Senior U.S. and Chinese officials are poised to start another round of talks next week.

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