Oil rises 2% on Saudi Arabia, OPEC cuts

Crude Oil

Saudi Arabia plans to pump around 9.8 million bpd in March, more than 500,000 bpd below its target under the deal, its energy minister told the Financial Times.

The American Petroleum Institute (API) on Tuesday said that USA crude inventories fell by 998,000 barrels in the week to February 8 to 447.2 million, compared with analyst expectations for an increase of 2.7 million barrels.

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

While the region, which accounts for about half of the world's refining capacity, is still able to source oil, it's becoming harder to get hold of the grades of crude that many Asian refiners prefer.

The EIA, however, added a note of caution that USA production would be capping oil price gains.

Despite the OPEC cuts and crisis in Venezuela, analysts said global oil markets remain well supplied.

In the Organization of Economic Co-operation and Development (OECD), oil demand was revised down by 0.02 mb/d due to lower economic projections for OECD Americas in 1Q19 and OECD Europe for the whole of 2019, reads the report.

Opec members vowed to cut 800,000 barrels a day of that amount, so January's figures fell just 3,000 barrels short of that commitment.

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Analysts say a rise in oil prices is good for the country that sank into recession previous year as a result of sharp dip in oil prices.

United States prices were also supported by a report from the American Petroleum Institute (API) on Tuesday showing that crude inventories fell by 998,000 barrels in the week to 8 February to 447.2 million, compared with analyst expectations for an increase of 2.7 million barrels.

US sanctions on Iran and Venezuela have choked off supply of the heavier, more sour crude that tends to yield larger volumes of higher-value distillates, as opposed to gasoline. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news.

IEA figures show Venezuala's output dropping by roughly 30,000 barrels per day to 1.26 mbd.

Venezuela accounted for 1 million bpd of heavy-sour crude production out of a worldwide total of 7 million bpd in 2017 ("World Oil Review", ENI, 2018).

For refineries that have invested in delayed coking units, however, heavy crudes can yield large volumes of middle distillates (gasoil, diesel and jet fuel). Saudi Arabia slashed oil production by 350,000 barrels per day.

Oil descended into a bear market in November, a swift drop from four-year highs seen in October, as traders grew anxious over strengthening U.S. production and an outlook for softer global fuel demand.

John Kemp is a Reuters market analyst.

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