Oil remains bid in Asia on Venezuela sanctions and OPEC output cut

Oil remains bid in Asia on Venezuela sanctions and OPEC output cut

Oil remains bid in Asia on Venezuela sanctions and OPEC output cut

US crude output is accelerating, highlighting OPEC's dilemma as the cartel reins in its own production to revive prices.

"Oil production is rapidly falling and companies that normally resell Venezuelan crude have not found ways to mitigate the effect of the United States sanctions", Barclays bank said.

Falih pointed out that the state-owned oil company "Saudi Aramco" was planning to develop an global energy exploration and production business, stressing that the overseas expansion would be the company future's "core pillar".

West Texas Intermediate (WTI) crude saw a 0.42-percent rise to $52.63 a barrel, while Brent blend was up 0.44 percent and trading at $61.78 per barrel as of 06:34 GMT.

Oil prices have remained steady near $60/bbl in London even as turmoil builds in Venezuela, as markets work through plentiful supplies accumulated past year, the IEA said.

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.

The country's average heavy crude price was also reported to be $56.29 since beginning of 2019 up to the report's publishing day.

OPEC cut output by nearly 800,000 bpd in January to 30.81m bpd.

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This is because the output restrictions agreed by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, which include Russian Federation, have resulted in mainly heavy and medium sour crude grades being cut.

In the United States, energy firms last week increased the number of oil rigs operating for the second time in three weeks, a weekly report by Baker Hughes said on Friday.

The U.S. administration likely calculated any fallout from sanctions on oil prices would be small given the limited volumes of crude involved and the expectation that the standoff would be resolved quickly.

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. In quality terms, it is more complicated.

Venezuela accounted for 16 percent of OPEC output and 8 percent of world production in 1970 but those percentages had fallen to just 5 percent and 2 percent respectively by 2017 (https://tmsnrt.rs/2E4Pfb9).

Furthermore, the report affirmed that in 2019, demand for OPEC crude is forecast at 30.6 mb/d, around 1.0 mb/d lower than the 2018 level.

OPEC is partnering with 10 non-member nations, including Russian Federation, to keep 1.2 million bpd off the market. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news.

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