Oil rises after Saudi output pledge, declining USA inventories

Crude Oil

USA 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.

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

But, "with the import of diluents now sanctioned by the US, and problems in producing its own lighter crudes, PDVSA will have a tough job to make enough on spec barrels available for export", the IEA said.

Estimates for how much crude is needed from OPEC were lowered by 300,000 bpd from last month's assessment amid surging supplies from its rivals, driven by the US shale boom.

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

"Over the past two years, global oil demand has turned out to be higher than expected, supported by healthy economic activities, particularly in the OECD", said the report.

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

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Brent oil jumped to an 8-day high of $63.32 per barrel yesterday after the Organization of the Petroleum Exporting Countries (OPEC) said that it had cut its output by nearly 800,000 barrels per day in January to 30.81 million barrels per day.

At the start of the year, the investment bank had reduced its outlook for oil prices this year citing abundant supply. The dense crudes are much more hard to refine and tend to contain significant quantities of sulfur and other impurities that are costly to remove.

On Monday, a report from OPEC showed the Middle East-dominated group fell just short of its production goal in January, as a fresh round of production cuts got underway. The price has largely plateaued since then, in spite of the subsequent imposition of USA sanctions.

Despite the political rifts between Venezuela and the United States, US refiners have in the past been some of the biggest buyers of Venezuelan crude.

In the OECD, 2019 USA growth was revised lower to 2.5 percent, following growth of 2.9 percent in 2018, while eurozone growth was also revised down to 1.3 percent for 2019, after growth of 1.8 percent in 2018, it said. In response to Maduro's call for aid, an OPEC spokesman familiar with the subject matter had been quoted saying that the Organization of the Petroleum Exporting Countries (OPEC), declined to make any formal statement and said that they were more concerned about their policies, not politics. The supply cuts, which also include Russian Federation and nine other non-OPEC producers, took effect on January 1.

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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