Oil rises 2% on Saudi Arabia, OPEC cuts

Kenny Grant
February 14, 2019

Additionally, gains are being limited by weakening global demand.

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.

With OPEC engaged in supply management and the Middle East entangled in political conflicts while production outside the group surges, Bank of America Merrill Lynch said OPEC's global market share would fall as its outright output drops to 29 million barrels per day (bpd) in 2024 from 31.9 million bpd in 2018.

In the report, OPEC said its oil output fell by 797,000 bpd month on month to 30.806 million bpd in January. "China trade talks, ignoring the risks now in place from the loss of Venezuelan barrels", US bank J.P. Morgan said in a weekly note.

Goldman Sachs said on Tuesday, "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".

Oil has advanced around 19 percent this year as the OPEC+ alliance of producers cut output, but the rally has sputtered in February amid record USA shale drilling.

Additionally, the International Energy Agency said energy market participants may be able to adjust to USA sanctions against Venezuela's crude industry.

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The biggest prize in the contest for control of Venezuela and its state oil company Petroleos de Venezuela SA lies more than 2,000 miles northwest of Caracas.

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.

"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.

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

The American Petroleum Institute (API) reported a smaller-than-expected draw of 998,000 barrels during the week-ending February 8. Analysts polled by Reuters forecast an increase of 2.7 million barrels.

Gasoline inventories for the same period rose 746,000 barrels. Analysts were looking for a build of 508,000 barrels for the week. At least part of that buildup reflected weather problems and seasonal maintenance at refineries, said Matt Sallee, a portfolio manager at Kansas-based Tortoise.

Mars, a medium crude grade from the U.S. Gulf, has moved to a rare premium over Louisiana Light Sweet.

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