United States oil inventories increase last week

Daniel Fowler
February 7, 2019

The Organization of the Petroleum Exporting Countries and 10 partner producers outside the cartel agreed late a year ago to hold back crude output by 1.2 million barrels a day for the first half of 2019, in an effort to soak up that global supply glut and rebalance the market.

Output declines from the Organization of the Petroleum Exporting Countries (OPEC) as they make good on their pact to curb a supply overhang were compounded by falling USA oil rig counts and sanctions on Venezuelan oil sales. The government's official supply report is due later on Wednesday.

USA oil prices pared losses and turned positive after the data release.

Fritsch of Commerzbank said the Venezuelan issue could still drive oil higher.

An oil pumpjack and a tank with the corporate logo of state oil company PDVSA are seen in an oil facility in Lagunillas, Venezuela January 29, 2019.

Still, some analysts were relieved that US crude oil inventories only rose by 1.3 million barrels in the week to February 1, according to the EIA, compared with expectations for an increase of 2.2 million barrels.

International Brent crude oil futures fell 25 cents, or 0.4 per cent, to $62.44 per barrel.

U.S. West Texas Intermediate (WTI) crude futures were at $53.82 per barrel at 0036 GMT, down 19 cents, or 0.35 percent, from their last settlement.

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Crude futures earlier posted around two-month highs.

On Tuesday, The Wall Street Journal reported that OPEC officials said Saudi Arabia and its Persian Gulf allies were looking to create a formal partnership with a 10-nation group led by Russian Federation to manage the world's oil market.

Also dampening market sentiment still were worries about weaker global economic growth and the US-China trade dispute.

OPEC and its allies will probably extend their oil-cuts agreement later this year to keep prices at "comfortable" levels, according to Azerbaijan's energy minister.

Analysts said that USA sanctions on Venezuela had focused market attention on tighter global supplies.

While OPEC and allied producers are slashing their output in an attempt to boost crude prices, which saw a rapid fall past year, the United States has been opposing the measure and vowed to continue expanding its supply.

“With higher production from non-OPEC producers, especially the USA, over the last few years, OPEC's market share has been shrinking, ” said James Williams, energy economist at WTRG Economics.

US President Donald Trump last week said he would meet with Chinese President Xi Jinping, perhaps twice, in the coming weeks to try to seal a comprehensive trade deal with Beijing, but acknowledged it was not yet clear whether a deal could be reached.

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