Oil gets a boost from Saudi output pledge, declining USA inventories

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

The cartel made the pledge past year alongside major oil producing countries outside the cartel, including Russian Federation, to safeguard oil prices against a global economic slowdown.

The OPEC, which Saudi Arabia de-facto leads as the world's top crude oil exporter, said on Tuesday that it had cut its output by nearly 800,000 bpd in January to 30.81 million bpd. The supply cuts, which also include Russian Federation and nine other non-OPEC producers, took effect on January 1.

Most of that reduction has been thanks to Saudi Arabia.

The IEA said that compliance with the so-called Vienna Agreement was 86 percent by OPEC states, with Saudi Arabia, UAE and Kuwait cutting by more than promised.

Heavy-sour supplies are common in OPEC, whose members started a new round of production cutbacks last month. American supply growth this year will exceed Venezuela's total output, the IEA said, another signal that OPEC's efforts to buoy prices may ultimately prove self-defeating.

Most new supply is coming from the United States, where crude production rose by more than 2 million bpd a year ago to a record 11.9 million bpd, making the country the world's biggest oil producer ahead of Russian Federation and Saudi Arabia.

Just months earlier, they had relaxed production caps as prices shot higher on market worries about the impact of USA sanctions on Iran.

The oil price has risen by 20 percent so far this year, yet most of that increase materialised in early January, before the imposition of USA sanctions on Venezuela's energy sector.

OPEC pumped about 30.8 million barrels a day in January, just above the 30.7 million required on average in 2019.

"Oil prices have not increased alarmingly because the market is still working off the surpluses built up in the second half of 2018", the IEA said.

Oil production in Venezuela, which has been rocked by a crippling economic crisis, spiralling political turmoil and U.S. sanctions, meanwhile sank by 59,000 barrels per day.

"So far, there are no signs that other producers, e.g".

"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.

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.

The "call" on OPEC crude is now forecast at 30.7 million bpd in 2019, down from the IEA's last estimate of 31.6 million bpd in January.

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