Published: Thu, February 14, 2019
Markets | By Noel Gibbs

OPEC cuts & USA sanctions against Iran and Venezuela boosting global crude prices

OPEC cuts & USA sanctions against Iran and Venezuela boosting global crude prices

Oil prices rose on Thursday, buoyed by hopes that potential progress in the latest Sino-U.S. tariff talks would improve the global economic outlook, and as China's trade figures including crude imports beat forecasts.

Brent crude futures have risen 20 percent in 2019 to around $63 a barrel, but most of that increase took place in early January.

Oil prices rose on Wednesday as producer club Organisation of the Petroleum Exporting Countries (OPEC) said it had cut supply deeply in January and as U.S. sanctions hit Venezuela's oil exports.

The OPEC, which Saudi Arabia de-facto leads as the world's top crude oil exporter, said on Tuesday that it had cut its output by nearly 800,000 bpd in January to 30.81 million bpd.

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"Even so, headline benchmark crude oil prices have hardly changed on news of the sanctions". They closed up 1.5 percent on Wednesday, having touched their highest since February 5 at $54.60 a barrel. The supply cuts, which also include Russian Federation and nine other non-OPEC producers, took effect on January 1.

The cartel made the pledge previous year alongside major oil producing countries outside the cartel, including Russian Federation, to safeguard oil prices against a global economic slowdown.

The OPEC's 14 members pumped 30.81 million bpd in January, down from 31.60 million bpd in December, according to its Monthly Oil Market Report.

"Oil production is rapidly falling and companies that normally resell Venezuelan crude have not found ways to mitigate the effect of the USA sanctions", Barclays bank said.

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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.

The price has largely plateaued since then, in spite of the subsequent imposition of USA sanctions.

But while Venezuela's crude now accounts for a very limited share of the global oil market, it plays a much more important role in the niche market for heavy crude.

In the US, oil inventories climbed 3.63 million barrels, while supplies of gasoline, heating oil and other fuels added about 3 million barrels more, according to weekly data from the Energy Information Administration.

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The March production figure means Saudi would be voluntarily cutting output by more than 500,000 bpd below its pledged production level under a deal between the Organization of the Petroleum Exporting Countries and allies led by Russian Federation. Analysts were looking for a build of about 2.300 million barrels.

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