Oil rises 2% on Saudi Arabia, OPEC cuts

Roman Schwartz
February 14, 2019

The agency also lowered its forecast for demand for OPEC crude, production of which the group has pledged to cut by 800,000 bpd this year as part of an agreement with Russian Federation and other non-OPEC producers such as Oman and Kazakhstan.

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.

In its monthly report released yesterday, OPEC said its crude output fell 797,000 barrels per day (bpd) in January compared with the prior month.

USA 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.

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.

IEA revised lower its forecast for demand for OPEC crude this year.

"In terms of crude oil quantity, markets may be able to adjust after initial logistical dislocations (from Venezuela sanctions)", the Paris-based IEA said.

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Climbing U.S. oil stockpiles weighed on prices.

Nigeria's oil production was to be cut by 53,000 barrels to arrive at a new quota of 1.685 million bpd down from Nigeria reference production figure of 1.797m bpd.

But while Venezuela's crude now accounts for a very limited share of the global oil market, it plays a much more important role in the niche market for heavy crude.

According to the agreement clinched in December, Saudi Arabia alone has reportedly reduced production of crude by almost 400,000 barrels per day to 10.24 million barrels.

USA 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.

Output has gone into free fall as the country's isolation has increased, shrinking from 2.4 million bpd in 2016 to 2.0 million bpd in 2017 and 1.5 million bpd in 2018, according to the Joint Organisations Data Initiative.

The Organisation of the Petroleum Exporting Countries (OPEC) said on Tuesday that it had cut its output by nearly 800,000 bpd in January to 30.81 million bpd.

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