Opec tightens its taps as global oil demand stalls

Marco Green
February 13, 2019

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

An oil pump is seen at sunset outside Scheibenhard, near Strasbourg, France, October 6, 2017. U.S. West Texas Intermediate (WTI) crude oil futures rose $1.20, or 2.3 percent, to $53.61 a barrel.

Companies added 7 oil rigs in the week to February 8, bringing the total count to 854, pointing to a further rise in United States crude production, which already stands at a record 11.9 million bpd.

The Organisation of Petroleum Exporting Countries (Opec) said it tightened its crude taps to cut nearly 800,000 barrels a day from its oil exports in January after vowing to drain excess oil from the oversupplied market.

As a result, Morgan Stanley said "low refining margins and weaker economic data means oil prices can rally only so much (and) we continue to see modest upside for Brent to $65 per barrel in the second-half (of 2019)".

"We believe that oil is not pricing in supply-side risks lately as markets are now focused on U.S".

The EIA has estimated that U.S. production will average 12.1million bpd, which would mark a new record.

Venezuela has tried to find alternative customers, especially in Asia, but under USA pressure many buyers there are also shying away from dealing with PDVSA.

"Preventing crude prices from falling much further have been USA sanctions on Venezuela, targetting its state-owned oil firm PDVSA". OPEC's share of that cut is 800,000 bpd.

"Oil markets continue to focus at the macro level on the dual notions of adequate supply and softening demand", Frank Verrastro, senior vice president for the Energy and National Security Program at the Center for Strategic and International Studies (CSIS), a USA think-tank, said in a note.

Growing U.S. supply and a potential economic slowdown this year could cap oil markets. "China trade and broader economic concerns, the approach of seasonal refinery maintenance - when crude oil demand declines - and an influx of new supply from the United States and elsewhere".

Global oil cartel Opec said Tuesday it sharply reduced crude oil production last month, after heavyweight Saudia Arabia slashed output and exports fell in crisis-hit Venezuela.

OPEC, Russia and other non-OPEC producers, an alliance known as OPEC+, agreed in December to reduce supply by 1.2 million bpd from January 1 to prevent excess supply building up.

Other reports by Click Lancashire

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