Sign Up for FREE Daily Energy News
  • Stay Connected
  • linkedin
  • twitter
  • facebook
  • youtube2

Hazloc Heaters
Copper Tip Energy Services
Copper Tip Energy
Hazloc Heaters

Oil Holds Near 2-Month High on Venezuela Risk, Lower OPEC Output

English Español 简体中文 हिन्दी Português
These translations are done via Google Translate
Feb 4, 2019, by Tsuyoshi Inajima and Alex Longley

Oil held gains near a two-month high after data showed U.S. production growth slowing at a time when OPEC cuts and American sanctions on Venezuela have already eased concerns over a supply glut.

Futures in New York rose as much 0.9 percent to reach the highest intraday level since Nov. 21, after adding 2.7 percent Friday. OPEC’s crude output fell the most in two years in January, according to a Bloomberg survey of officials, analysts and ship-tracking data. The number of active oil rigs in the U.S. dropped to the lowest level in almost nine months, data released Friday by oilfield-services provider Baker Hughes show.

Oil has rebounded this year as OPEC’s production cuts have taken effect, clawing back more than half of its 40 percent slump last quarter. The rally has seen hedge funds slash bearish bets on crude, although gains are being capped by slowing global growth and uncertainty over the U.S.-China trade war. Venezuela has become the wildcard in the supply-demand equation as its deepening political crisis threatens to weigh further on production.

“You still have the issue of the sanctions on Venezuela on top of the supply cuts from Saudi Arabia so that is providing some support,” said Olivier Jakob, managing director of Petromatrix GmBH. “Overall in crude there are no clear signs of an overhang right now.”

Traders are watching how much Venezuelan production — at 1.27 million barrels a day in January, according to data compiled by Bloomberg — will be removed from the market after the U.S. announced sanctions on the nation’s state oil company last week. The U.S. penalties could cut Venezuelan output by nearly 1 million barrels a day, Citigroup Inc. said in a Jan. 31 note.


West Texas Intermediate crude for March delivery rose 3 cents to $55.29 on the New York Mercantile Exchange at 11:15 a.m. in London. The contract increased $1.47 to $55.26 on Friday.


Brent for April settlement climbed 26 cents to $63.10 a barrel on the London-based ICE Futures Europe exchange. The contract advanced $1.91 to $62.75 on Friday. The global benchmark crude was at a $7.55 premium to WTI for the same month. The nearest timespread moved into a bullish backwardation structure on Monday indicating tight supply in the physical market.

Output from the Organization of Petroleum Exporting Countries’ 14 current members fell by 930,000 barrels a day last month to 31.02 million, according to the Bloomberg survey. Top exporter Saudi Arabia cut deeper than pledged, while the kingdom’s close allies the United Arab Emirates and Kuwait also made sizable reductions.

In the U.S., working rigs drilling for oil fell by 15 to 847, the least since May, Baker Hughes said. The data showed the biggest drop in rigs among major U.S. shale plays came from the Permian Basin of West Texas and New Mexico, where the count dropped by three to 481.

The Trump administration moved to block state-run oil company Petroleos de Venezuela SA and its customers from using the U.S. financial system in updated guidance on its sanctions. Any transactions with PDVSA, or any entity in which it has a controlling stake, involving U.S. citizens, or passing through the country’s financial system, must be wound down by April 28, the Treasury said.

Other oil-market news: President Trump said his administration is  “doing very well” on making a trade deal with China ahead of a March 1 deadline when tariffs are set to rise. The Gulf of Mexico is turning into a parking lot for Venezuelan crude, as the U.S. sanctions on Petroleos de Venezuela SA essentially stop the flow of oil from the Latin America country. As Russia’s Big Oil is set to report earnings for the final quarter of 2018, it’ll have to say goodbye to a streak of earlier record rises.  Norway has built a reputation as one of the calmest and most predictable corners of the global oil industry, but lately, it’s been full of surprises.

Share This:

More News Articles