Published: Thu, February 14, 2019
Business | By Eloise Houston

Opec tightens its taps as global oil demand stalls

Opec tightens its taps as global oil demand stalls

US bank Morgan Stanley said the surge in USA crude oil production, which tends to be light in quality and which rose by more than 2 million barrels per day (bpd) past year to a record 11.9 million bpd, had resulted in overproduction of gasoline.

Brent crude futures continue to track higher with bulls eying a break above the 2019 peak ($63.63/bbl).

USA sanctions on Venezuela's state-owned oil company are tightening the global oil market and sending refiners around the world scrambling to find replacements for the country's diesel-rich heavy and extra heavy crudes. The cartel and the world's biggest exporter, Saudi Arabia, slashed its output more than expected under the OPEC deal, to 10.2 million barrels a day in January and is aiming to pump around 100,000 barrels less in February.

Prices of the American reference for the sweet light crude oil are prolonging the recovery on Wednesday, trading at shouting distance from the $54.00 mark per barrel ahead of the EIA report.

OPEC production fell to a four-year low in January as the cartel applied a new pact to boost global oil prices, the International Energy Agency said Wednesday, but Russian Federation and other ex-Soviet states failed to cut back output as much as promised. The improvement in the global risk tone has also provided a lift for Brent crude futures.

U.S. West Texas Intermediate (WTI) crude oil futures were at $52.78 per barrel at 0329 GMT, up 37 cents, or 0.7 percent, from their last close.

In the meantime, the political rift between Venezuela and the United States continues with the US sanctions against the South American nation giving prices a slight boost.

"This is because, in terms of crude oil quantity, markets may be able to adjust after initial logistical dislocations", the group added.

Oil climbed for a second day as dwindling shipments from two of the world's biggest crude exporters eclipsed another big jump in US supplies.

Khalid al-Falih, 59, who is also chairman of Saudi Aramco, the state-owned oil group, said that the company meant to build an global energy exploration and production business for the first time.

In the US, oil inventories climbed 3.63 million barrels, while supplies of gasoline, heating oil and other fuels added about 3 million barrels more, according to weekly data from the Energy Information Administration.

Further news from the IEA's report said the agency now sees demand for OPEC crude at 30.7 mbpd this year vs. 31.6 mbpd previous. Analysts polled by Reuters forecast an increase of 2.7 million barrels.

Like this: