Markets

Oil Holds Gain as Saudi, Venezuela Supply Cuts Eclipse U.S. Boom

Oil Holds Gain as Saudi, Venezuela Supply Cuts Eclipse U.S. Boom

US bank Morgan Stanley said the surge in USA crude oil production, which tends to be light in quality and which rose by more than 2 million barrels per day (bpd) past year to a record 11.9 million bpd, had resulted in overproduction of gasoline.

International Brent crude oil futures were up 37 cents, or 0.6 percent, at $63.98 a barrel.

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

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.

At the moment the barrel of WTI is up 1.36% at $53.98 facing the next hurdle at $ $55.59 (2019 high Feb.4) ahead of $57.55 (100-day SMA) and then $58.00 (high Nov.16 2018).

In January, Falih said Saudi Arabia went beyond its commitment to lower both the production and exports of oil over the last couple of months.

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 "call" on OPEC crude is now forecast at 30.7 million bpd in 2019, down from the IEA's last estimate of 31.6 million bpd in January. The improvement in the global risk tone has also provided a lift for Brent crude futures.

And while OPEC and its allies, including Russian Federation, withhold supply, U.S. output is expected to rise further, with the Energy Information Administration saying on Tuesday that United States crude production is expected to reach 13.2 million bpd by 2020.

Previous pacts by OPEC and its partners including Russian Federation, often called OPEC+, to cut back production have been marked by initial low compliance rates by certain countries.

US sanctions on Iran and Venezuela, together with OPEC's output cuts, have therefore removed mostly medium and heavy oils from the market, leaving lighter grades relatively unaffected.

The price has largely plateaued since then, in spite of the subsequent imposition of US sanctions. In another bullish sign this week, President Donald Trump struck a conciliatory tone on trade talks with China, suggesting higher tariffs might be averted. Analysts polled by Reuters forecast an increase of 2.7 million barrels.

"In quantity terms, in 2019, the USA alone will grow its crude oil production by more than Venezuela's current output".