Opec tightens its taps as global oil demand stalls

Crude Oil

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

Analysts said markets are tightening amid voluntary production cuts led by the Organization of the Petroleum Exporting Countries (OPEC) and because of US sanctions on Venezuela and Iran.

The IEA left its demand growth forecast for 2019 unchanged from its last report in January at 1.4 million barrels per day.

Futures in NY closed up 1.5 percent, reaching the highest point in a week.

United States prices were also supported by a report from the American Petroleum Institute (API) on Tuesday showing that crude inventories fell by 998,000 barrels in the week to 8 February to 447.2 million, compared with analyst expectations for an increase of 2.7 million barrels.

However, analysts are warning that record United States supply and anticipated economic slowdown later this year might start capping the world's oil markets.

"With so far no sign of change in government, we see increasing risks that production losses could be larger and sooner than our forecast for a 0.33 million-bpd supply loss in 2019", U.S. bank Goldman Sachs said in a note on Wednesday.

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.

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.

Markets were also supported by upbeat Chinese trade data, including for crude oil.

OPEC+ is a 24-nation oil-producer coalition that includes Organization of the Petroleum Exporting Countries and nonmembers.

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. In another bullish sign this week, President Donald Trump struck a conciliatory tone on trade talks with China, suggesting higher tariffs might be averted.

Crude inventories built for a fourth week in a row, rising 3.6 million barrels to 450.8 million barrels in the week to February 8.

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. Analysts polled by Reuters forecast an increase of 2.7 million barrels.

Related:

Comments


Other news