Crude oil prices are on the uptrend on Wednesday after the Organization of Petroleum Exporting Countries (OPEC) said it cut its yields severely in January. Meanwhile, the US sanctions hit Venezuelan oil exports, which additionally supported energy prices.
Brent crude oil futures rose by 0.67 USD, or 1.07%, to 63.09 USD per barrel, while the light US crude oil WTI appreciated by 0.54 USD, or 1.02%, to 53.64 USD per barrel.
Prices in the United States were also backed by a report by the American Petroleum Institute (API) on Tuesday, which showed crude oil stockpiles fell by 998,000 barrels in the week to February 8, reaching 447.2 million barrels. This is well below the analysts’ expectations for growth in inventories by 2.7 million barrel.
Meanwhile, the gasoline inventories increased by 746,000 barrels with analysts expectations for growth of 508,000 barrels for the week.
Distillate inventories decreased this week by 2.481 million barrels, compared to a smaller expected draw of 1.090 million barrels.
Crude oil inventories at the Cushing, Oklahoma facility fell by 502,000 barrels for the week.
The US crude oil production, as estimated by the Energy Information Administration, showed that production for the week ending February 1st, which is the latest information available, averaged 11.9 million barrels per day for the fourth week in a row.
The OPEC said on Tuesday it had cut its yield by almost 800,000 barrels per day in January to 30.81 million barrels per day.
Problems with supply from the OPEC member Venezuela also raise prices. The South American country is undergoing a political and economic crisis, and Washington has introduced sanctions on oil exports of the state-owned company PDVSA. Despite the political problems between Venezuela and the United States, American refineries in the past were some of the biggest buyers of crude oil from Caracas and will suffer most from the sanctions.
However, the analysts still consider that global oil markets are well-stocked and production cuts in OPEC and the Venezuelan crisis are not having a significant effect globally.
Oil markets continue to focus on a macro level on the dual idea of adequate supply and declining demand.
The markets are well-stocked for adequate global oil reserves, the prospect of weakening demand for US-China trade and wider economic concerns, the approach to seasonal refineries’ refinancing – when demand is shrinking – and the flow of new supplies from the United States and other places.
IEA: Venezuela poses a serious risk to global oil markets
The political crisis in Venezuela may disrupt global supplies of crude oil, as the country’s production rate is slowing down, warns the International Energy Agency.
The United States, the largest oil buyer in the South American country, banned oil imports from Venezuela, accusing President Nicolas Maduro of manipulating presidential elections and usurping power.
Venezuela’s oil production has already reached its lowest level in a decade against the backdrop of the deepening crisis affecting the country’s economy, governance, and population.
“Although global markets continue to enjoy sufficient oil supplies, the Venezuelan political crisis pose a serious risk as the extraction of heavier oil is declining elsewhere”, says the IEA.
The Organization of Petroleum Exporting Countries (OPEC), to which Caracas also belongs, cuts production to prevent a further price drop due to market saturation.
Crude oil prices remain stable at a price of about 60 USD per barrel in London, even in the continuing turmoil in Venezuela, as markets are still working with multiple supplies accumulated over the past year.
But the shortage of heavy crude oil can lead to complications for many refineries, such as those on the US coast, with the necessary equipment for its processing.
Heavy oil supplies are typical of OPEC countries whose members started a new round of layoffs in January, cutting their yields to a record 930,000 barrels per day to its lowest level in four years.
The cartel aims to maintain market balance this year, despite the expected decline in demand.
In January, OPEC produced 30.8 million barrels per day, well below the required average of 30.7 million barrels per day.
On the other hand, shale oil production in the United States is expected to grow this year to surpass Venezuela’s total production.
The IEA maintains its forecast global oil demand despite signs of slowing world economic growth as consumption will continue to be supported by low oil prices and the launch of a number of petrochemical projects in China and the United States.