IEA Says Venezuela Crisis Risks Disrupting Global Crude Market

IEA Says Venezuela Crisis Risks Disrupting Global Crude Market

Saudi Arabia's Energy Minister, Khalid al Falih, told the Financial Times that the kingdom would reduce production to about 9.8million bpd in March, down from a record high of 11.1million bpd in November.

A day later, the EIA confirmed the inventory build, but a smaller one at 1.3 million barrels.

The rapid growth in USA production, led by shale oil output, has led to an unwelcome build in inventories of crude and refined products, while refining margins for the gasoline it yields have collapsed around the world.

"Even so, headline benchmark crude oil prices have hardly changed on news of the sanctions".

In the meantime, the political rift between Venezuela and the United States continues with the US sanctions against the South American nation giving prices a slight boost.

Oil prices have struggled to rise amidst an oversupplied market.

In the Organization of Economic Co-operation and Development (OECD), oil demand was revised down by 0.02 mb/d due to lower economic projections for OECD Americas in 1Q19 and OECD Europe for the whole of 2019, reads the report.

The combination of the OPEC-led production cuts, the increased reduction by the Saudis and in a limited way, the sanctions against Venezuela are helping to underpin prices, but in order to put the market over the top, demand is going to have to increase.

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USA sanctions on Iran and Venezuela, together with OPEC's output cuts, have therefore removed mostly medium and heavy oils from the market, leaving lighter grades relatively unaffected.

OPEC said on Tuesday it had cut oil production steeply under a global supply deal, although it flagged headwinds confronting its efforts to prevent a glut this year including weaker demand and higher rival output.

Iranian heavy oil price increased $1.45 in January, according to OPEC's latest monthly report published on Tuesday. "Saudi Arabia, are intending to push more barrels into the market to offset shortfalls" of heavier grades of crude, the IEA warned.

U.S. West Texas Intermediate (WTI) crude oil futures were at $52.69 per barrel at 0751 GMT, up 28 cents, or 0.5 percent, from their last close.

Iran's crude oil production plunged to 2.754 million barrels per day (mb/d) in January 2019, about 1.064 million barrels per day less than in May 2018, when the United States withdrew from the 2015 nuclear agreement, OPEC said February 12.

Just months earlier, they had relaxed production caps as prices shot higher on market worries about the impact of USA sanctions on Iran.

"In terms of crude oil quantity, markets may be able to adjust after initial logistical dislocations (from Venezuela sanctions)", the Paris-based IEA said.

The Tuesday report estimated that non-Opec members would produce more oil than expected this year, particularly in the Gulf of Mexico and the United States.

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