OPEC cuts & United States sanctions against Iran and Venezuela boosting global crude prices

Crude Oil

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.

Previous pacts by OPEC and its partners including Russian Federation, often called OPEC+, to cut back production have been marked by initial low compliance rates by certain countries.

West Texas Intermediate, the U.S. marker, was up 1.9 per cent at $53.38 a barrel.

And while OPEC and its allies, including Russian Federation, withhold supply, United States output is expected to rise further, with the Energy Information Administration saying on Tuesday that U.S. crude production is expected to reach 13.2 million bpd by 2020.

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

Additionally, the International Energy Agency said energy market participants may be able to adjust to USA sanctions against Venezuela's crude industry.

Hopes of a US-China trade deal have lent extra oxygen to crude oil prices in past sessions and this should remain a key driver in the very near term.

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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 U.S. sanctions on Venezuela's energy sector.

Heavy crudes are much harder to refine and tend to contain significant quantities of sulfur and other impurities that are costly to remove, which is why they sell at a hefty discount to medium and light oils. "This is because, in terms of crude oil quantity, markets may be able to adjust after initial logistical dislocations", the group added.

In the United States, crude inventories fell by 998,000 barrels in the latest week, trouncing forecasts for a rise of 2.7 million barrels, according to data from industry group the American Petroleum Institute on Tuesday. Analysts were looking for a build of about 2.300 million barrels.

Saudi Aramco is the world's biggest oil company, producing ten million barrels of oil a day and managing 260 billion barrels in reserves.

Should US-China talks succeed, the US bank said oil markets would "switch attention from macro concerns impacting future demand growth to physical tightness and geopolitical risks impacting immediate supply".

Helping to keep a lid on the market are adequate global inventories, the prospect of weakened demand tied both to U.S. In the meantime, the markets seem well supported with buyers just waiting for any signs of increased demand.

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