Oil prices rise on OPEC output cuts, as USA sanctions bite

Oil prices rise on OPEC output cuts, as USA sanctions bite

Venezuela's diminished importance in the global oil market and as a supplier to the United States has emboldened the USA administration to take a tough approach in attempting to oust the government of Nicolas Maduro.

WTI has also derived some support after the API reported late on Tuesday a almost 1M barrel drop in United States crude oil supplies during last week.

The global oil market will struggle this year to absorb fast-growing crude supply from outside the Organization of the Petroleum Exporting Countries (OPEC), even with the group's production cuts and US sanctions on Venezuela and Iran, the International Energy Agency said in a report on Wednesday.

US crude oil inventories rose last week to the highest since November 2017 as refiners cut runs to the lowest since October 2017, the Energy Information Administration said on Wednesday.

OPEC production fell to a four-year low in January as the cartel applied a new pact to boost global oil prices, the International Energy Agency said Wednesday, but Russian Federation and other ex-Soviet states failed to cut back output as much as promised.

The IEA noted that new U.S. sanctions announced in January on Venezuela's state oil company PDVSA have not so far caused market jitters. Analysts polled by Reuters forecast an increase of 2.7 million barrels.

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On the supply side, Saudi Arabia, the defector leader of OPEC, said it was cutting daily production and exports by a further 500,000 barrels per day (bpd) on top of its agreed OPEC quota reduction.

The U.S. Treasury's guidance, which appears deliberately unclear, has left many third-country buyers uncertain about whether they can do business with PDVSA without also falling foul of sanctions.

He added that markets were amply supplied due to "adequate global oil inventories, the prospect of weakened demand tied both to US-China trade and broader economic concerns, the approach of seasonal refinery maintenance - when crude oil demand declines - and an influx of new supply from the United States and elsewhere".

Oil climbed for a second day as dwindling shipments from two of the world's biggest crude exporters eclipsed another big jump in US supplies.

Mid-distillates are especially prized at the moment with the forthcoming introduction of new bunker fuel regulations by the International Maritime Organization from the start of 2020.

In effect, sanctions have shifted the balance of global oil production in the direction of lighter crudes, at the same time that the economy and forthcoming regulations are pushing refinery demand towards heavier grades.

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