Oil falls as USA maintains record output, inventories climb

Andrew Cummings
February 7, 2019

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

The US sanctions against the Latin American country will also affect $11 billion worth of exports as Washington is waging a campaign to support Juan Guaido, who recently declared himself Venezuela's new leader.

Guaido's team is planning for a post-Maduro government with an emergency scheme to supply fuel domestically, given widespread shortages across Venezuela, Goicoechea said.

“The plus side for USA producers is that they get the higher price benefit without cutting their own production.”.

"The price has yet to react in any noticeable way", Fritsch said of the sanctions.

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.

USA crude inventories rose by 2.5 million barrels last week and gasoline stocks also increased, the American Petroleum Institute said.

Futures on U.S. and global benchmarks, West Texas Intermediate (WTI) and Brent crude, rose to the highest level since late November 2018.

International Brent crude oil futures on Monday were down 20 cents, or 0.32 percent at 0339 GMT to $62.54 a barrel, after closing up 3.14 percent in the previous session to their highest close since November 21. The global benchmark crude was at an $8.36 premium to WTI for the same month.

The producers known as OPEC+ started cutting production by 1.2 million barrels per day (bpd) from last month to avert a new supply glut, and OPEC has delivered nearly three quarters of its pledged cuts already, a Reuters survey showed last week. OPEC supply fell last month by the largest amount in two years, a Reuters survey last week found.

Short-term, the market is getting a boost from US sanctions on Venezuelan oil exports. Output from OPEC's 14 current members fell by 930,000 barrels a day to 31.02 million, according to a Bloomberg survey.

Citgo, the eighth-largest US refiner and Venezuela's top foreign asset, is in the middle of a tug of war as the Trump administration has made aggressive moves to remove it from Maduro's control.

"The price has yet to react in any noticeable way", he said. -China trade war, which has dragged on world markets as investors worry that the dispute could contribute to a potential global economic slowdown.

While OPEC and allied producers are slashing their output in an attempt to boost crude prices, which saw a rapid fall a year ago, the USA has been opposing the measure and vowed to continue expanding its supply.

In his State of the Union address, U.S. President Donald Trump said a trade deal was possible with China.

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