Global oil supply to swamp demand in 2019 despite output cuts - IEA

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

Since January 1, an OPEC-led group has been cutting at least 1.2 million barrels per day from production in an effort to trim the global supply and stabilize prices.

Saudi Arabia will reduce oil production to nearly 9.8 million barrels per day in March, Minister of Energy, Industry and Mineral Resources and Chairman of Saudi Aramco Khalid Al-Falih told the Financial Times.

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.

The rapid growth in USA production, led by shale oil output, has led to an unwelcome build-up in inventories of crude and refined products while refining margins for the gasoline it yields have collapsed around the world.

But the country's oil industry has been in relative and absolute decline for the last 50 years as problems of producing and marketing its heavy crudes have been compounded by an unattractive investment regime and mismanagement.

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

"The imposition of sanctions by the United States against Venezuela's state oil company Petroleos de Venezuela (PDVSA) is another reminder of the huge importance for oil of political events", the IEA said.

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.

United States oil supplies dropped by almost 1M barrels last week, API reported.

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.

Oil prices rose on Thursday, buoyed by hopes that potential progress in the latest Sino-U.S. tariff talks would improve the global economic outlook, and as China's trade figures including crude imports beat forecasts.

Refineries are built to handle a certain quality of crude, and those which process so-called heavy crude from Venezuela, Canada or the Middle East can not be easily converted to treat the light shale oil that is now being produced in greater quantities in the United States.

But climbing USA oil stockpiles weighed on prices.

Mid-distillates are especially prized at the moment with the forthcoming introduction of new bunker fuel regulations by the International Maritime Organization from the start of 2020.

John Kemp is a Reuters market analyst.

Related:

Comments

Latest news

Wizards' John Wall needs Achilles surgery; out another year
The team released a statement saying he ruptured his left Achilles tendon following the initial January 8 surgery. And Achilles injuries are known to be hard to return from at all, let alone do so at the skill level held prior.

Lufthansa Sues Passenger Who Deliberately Missed Flight
The court ruled that Lufthansa's contract terms lack transparency and can't be used to recalculate airfare in a case such as this. It can be a sneaky way to save money on fares, with direct flights sometimes costing more than stopover journeys.

Anthony Joshua targets becoming global star with American debut, says Eddie Hearn
Miller - nicknamed "Big Baby" - won 20 of his fights by knockout but Joshua represents a huge step-up in class. The 29-year-old last fought in September at Wembley, stopping Russia's Alexander Povetkin in seven rounds.

Israel warns Iran that its missiles can travel 'very far'
Israel has been increasingly open about carrying out air strikes in Syria with an election looming in April. It referred to a meeting between Netanyahu and Oman's foreign affairs minister Yusuf bin Alawi.

Russian, Chinese lasers threaten US satellites: Pentagon | newkerala.com #100630
They have also developed the command and control systems needed to deploy these capabilities as weapons. But that's not stopping Russian Federation and China from military space technology developments.

Other news