SINGAPORE: Oil prices rose on Friday as markets tightened amid output cuts by producer club OPEC, but surging U.S. supply and a global economic slowdown prevented crude from climbing further.
U.S. West Texas Intermediate (WTI) crude oil futures were at $57.41 per barrel at 0350 GMT, up 19 cents, or 0.3 percent, from their last settlement.
International Brent crude futures were at $66.59 per barrel, up 28 cents, or 0.4 percent.
Traders said oil markets were currently tightening.
In Venezuela, oil exports have plunged by 40 percent to around 920,000 barrels per day (bpd) since the U.S. government slapped sanctions against its petroleum industry on Jan. 28.
This drop comes as the Organization of the Petroleum Exporting Countries (OPEC), of which Venezuela is a founding member, has led efforts since the start of the year to withhold around 1.2 million bpd of supply to prop up prices.
“Global (oil) markets appear tighter than many anticipated for this time of year, but scores of unsold barrels can pile up quickly and saturate regions,“ Canada’s RBC Capital Markets said in a research note on oil markets.
Despite this, there are signs that point to a more amply supplied market heading further into 2019.
The U.S. Energy Department said on Thursday it was offering up to 6 million barrels of crude from national emergency reserves to raise funds to modernize the U.S. strategic oil reserves.
Additionally, U.S. crude output has hit a record of more than 12 million bpd , pushing exports to an unprecedented 3.6 million bpd in February.
Investment bank RBC estimated that oil from the U.S. Gulf of Mexico port of Houston “can economically move anywhere globally when priced at a discount of $1.70 per barrel relative to the waterborne Brent benchmark”.
Crude loading from Houston last traded at $6.60 a barrel over WTI, which still put it at a discount of more than $2.15 per barrel to Brent.
On the demand side, a Reuters poll showed analysts expect global fuel demand to slow this year amid a broad economic slowdown.
China’s February factory activity fell for a third month as the world’s second-largest economy continued to struggle with weak export orders, a private survey showed on Friday.
The weakness is being felt across the region. South Korea’s exports contracted at their steepest pace in nearly three years in February as demand from its major market China cooled further in yet another sign of faltering momentum in Asia’s fourth-largest economy.
Despite this, fuel consumption especially in Asia’s developing economies, which are key drivers of global oil demand, is so far holding up.
India’s diesel consumption, for instance, is expected to rise to a record this year amid a strong expansion of its heavy duty vehicles amid economic growth of around 7 percent.
SINGAPORE, Jan 30 (Reuters): Oil prices rose on Wednesday as concerns about supply disruptions following U.S. sanctions on Venezuela’s oil industry outweighed downward pressure from a darkening outlook for the global economy.
U.S. West Texas Intermediate (WTI) crude futures were at $53.54 per barrel at 0455 GMT, up 23 cents, or 0.4 percent, above their last settlement.
International Brent crude oil futures rose 37 cents, or 0.6 percent, to $61.69 per barrel.
The gains followed a 2 percent price jump in the previous session, when markets first digested the U.S. sanctions on Venezuela’s oil exports.
Washington on Monday announced export sanctions against state-owned oil firm Petroleos de Venezuela SA (PDVSA), limiting transactions between U.S. companies that do business with Venezuela through purchases of crude oil and sales of refined products.
“The sanctions so far have been mostly disruptive for refiners on the U.S. Gulf Coast, who are being forced to seek alternative heavy crude supplies, and have stepped up purchases from Canada,” said Vandana Hari of Vanda Insights, an energy consultancy.
She added, however, that Canadian oil exports would be “constrained by pipeline capacity bottlenecks.
The sanctions aim to freeze sale proceeds from PDVSA’s exports of roughly 500,000 barrels per day (bpd) of crude oil to the United States.
Although the move pushed up oil prices, markets appeared relatively relaxed as the sanctions only affect Venezuelan supply to the United States.
“The (Venezuelan) export volumes will not be eliminated from the market, but rather rerouted to other countries,” said Paola Rodriguez-Masiu, an analyst at consultancy Rystad Energy.
With the United States dropping out as a customer for Venezuelan oil, she added that “China and India … will be able to pick up these oil volumes at great discounts.”
Despite this, some analysts said that non-U.S. oil trading firms with operations in the United States may still avoid dealing with Venezuelan oil.
The Schork Report, a daily oil and gas trading publication, said on Wednesday that many “international oil traders … have significant trading operations in the U.S. … At least in the short-term, these traders will undoubtedly quit buying from Venezuela until such a time that they are assured that they are not running afoul of U.S. sanctions.”
Other analysts also pointed to economic weakness as countering supply-side efforts to tighten the market such as the voluntary supply restraint by the Organization of the Petroleum Exporting Countries (OPEC).
“Pulling in the opposite (oil price) direction are heightened concerns about global growth, particularly that of China,” said Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank.
Global economic growth and fuel consumption are expected to slow this year amid a trade dispute between the United States and China, the world’s two biggest economies.
Officials from Washington and Beijing are set to launch a new round of trade talks on Wednesday aimed at resolving their disputes amid which both sides have slapped hefty import tariffs on each other’s goods.
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