Oil rises on tighter supply but U.S. factory data weighs

OPEC's oil exports to US fell to five-year low in January

Oil prices rose on Tuesday as investors expect United States sanctions on Venezuela and production cuts, led by OPEC and its allies, to head off any glut, but data showing a decline in U.S. factory orders weighed on the market.

The curious phenomenon of concerns over economic growth being softened somewhat by the prospect of tighter supply due to Venezuela repeated itself on Monday within the crude trading community, as West Texas Intermediate fell 70 cents to $54.56 per barrel and Brent dropping 24 cents to $62.51 per barrel.

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

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.

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

Crude inventories rose by 2.5 million barrels in the week ended February 1 to 448.2 million, compared with analysts' expectations for an increase of 2.2 million barrels.

Gasoline stocks increased by 513,000 barrels, less than anticipated, while distillate stockpiles posted a larger-than-expected drop by 2.3 million barrels.

"You have the sanctions on Venezuela, on top of the reduced supply from Saudi Arabia", Olivier Jakob, oil analyst at Petromatrix, said as cited by Reuters. "There's no sign of overhang in the crude oil markets".

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.

Late last month, the US imposed sweeping sanctions on oil firm PDVSA.

OPEC's share of the cut is 800,000 bpd, to be delivered by 11 members - all except Iran, Libya and Venezuela. A stronger dollar makes greenback-denominated commodities more expensive for holders of other currencies.

WTI futures were up $0.46, or 0.84%, at $55.02 per barrel by 0940 GMT. The oil market has also been aided by a slight pick-up in risk sentiment over the last month as US-China trade tensions are dialled down a touch. -China trade dispute. Oil prices fell on Tuesday after a survey showed euro zone business expansion almost stalled in January.

Senior US and Chinese officials are poised to start another round of trade talks next week.

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

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