Oil rises after Saudi output pledge, declining U.S. inventories

Muriel Colon
February 14, 2019

Brent oil prices rose on Wednesday after top exporter Saudi Arabia said it would cut crude exports and deliver an even deeper cut to its production while United States futures gained on a decline in domestic oil inventories.

The U.S., Venezuela's biggest customer, is banning oil imports from the country as it condemns President Nicolas Maduro for fraudulently clinging to power after disputed elections.

U.S. West Texas Intermediate (WTI) crude oil futures rose $1.20, or 2.3 percent, to $53.61 a barrel.

Brent crude futures gained $1.42, or 2.3 percent, to $62.93 a barrel by 11:55 a.m. EST (1655 GMT).

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

"The worries of oversupply stemming from the USA will likely remain a dominant theme as we approach the warmer months", said Edward Moya, market analyst at futures brokerage OANDA. "The market is holding up because of the outside markets, the hope for a trade deal, and a strong Dow", he said.

But some said supply-side risks were not receiving enough focus. "But the news about Saudi Arabia is pretty significant, so the market is reacting to that more so than anything else right now".

Saudi's Energy Minister Khalid al-Falih announced the move in an interview with the Financial Times published Tuesday, as the kingdom seeks to drive up oil prices to help fund an economic transformation plan.


Global supply fell 1.4 million barrels per day (bpd) to 99.7 million bpd in January, said the monthly report on Wednesday by the International Energy Agency.

The IEA said that compliance with the so-called Vienna Agreement was 86 percent by OPEC states, with Saudi Arabia, UAE and Kuwait cutting by more than promised. Trump said he's open to extending the March 1 deadline if the US and China are close to a trade agreement.

USA restrictions on Venezuela's energy sector have crippled exports and threaten to remove some 330,000 bpd in supply from the market this year, according to Goldman Sachs.

These customers have fallen away after Washington imposed sanctions earlier this year.

OPEC and other countries will either have to continue curbing extraction to maintain prices in the future or accept an energy independent USA and the likely oversupply of energy that would bring to the market.

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.

"In terms of crude-oil quantity, markets may be able to adjust after initial logistical dislocations", said the Paris-based IEA, which advises major economies on energy policy. "In quality terms, it is more complicated".

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