Oil rises after Saudi output pledge, declining US inventories

The Opec+ cuts are taking effect and US data is starting to reflect these changing market conditions. — Reuters  file

Asia's oil refiners are increasingly finding themselves trapped between the rock of OPEC's production cuts and the hard place of U.S. President Donald Trump's sanctions against Iran and Venezuela.

"Disruptions have increased with risks that Venezuela's production decline accelerates following the introduction of additional USA sanctions related to the Venezuelan oil industry", Reuters quoted the investment bank as saying.

USA 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.

Brent crude futures were up 1.17 US dollars or 1.9 percent at 62.68 USA dollars a barrel by 1135 GMT.

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

Further, the Energy Information Administration (EIA) said that Venezuelan output slipped to 1.22 million barrels per day.

While global markets remain comfortably supplied, disruption in Venezuela poses a threat because production of the heavier, higher-sulfur crude it pumps is being reduced elsewhere, the IEA said in a monthly report.

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"The Schork Report" Publisher Stephen Schork on the outlook for oil prices.

With OPEC engaged in supply management and the Middle East entangled in 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. OPEC and other countries will either have to continue curbing extraction to maintain prices in the future or accept an energy independent US and the likely oversupply of energy that would bring to the market.

Hassan Rouhani's government would face even a much worse scenario if the US decides to bring Iran's oil exports down to zero.

The cartel is broadly on track to keep markets balanced this year, even though demand for its crude will be lower than previously thought, the IEA's report indicated. In quality terms, it is more complicated.

Compliance by non-OPEC participants was only 25 percent, however, it said.

OPEC members along with allies including Russian Federation agreed in early December to trim production by 1.2 mbd from January 1, in a bid to eliminate a production glut and shore up prices.

The recent developments in the crude oil market have all but eliminated the discount enjoyed by heavy crudes, and in some cases, physical cargoes of some heavy grades have traded at premiums to light crudes.

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