Oil price rises after panic at OPEC

Crude Oil

Crude Oil

Also pressuring oil prices were sanctions that U.S. President Donald Trump implemented on Venezuela's oil exports in recent weeks, which has reduced supply from the global market.

He added that markets were amply supplied due to "adequate global oil inventories, the prospect of weakened demand tied both to US-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".

Oil benchmarks are trading in the green at press time on OPEC's output cuts and supply issues in Venezuela.

It said OPEC crude output was 930 thousand b/d lower in January at 30.83 million b/d, hitting a almost four-year low.

Given OPEC-kingpin Saudi's depth of relationship with Unites States, one of the recent evidences of which could be a Central Intelligence Agency cover-up of Saudi Journalist Jamal Khashoggi's high-rated murder on Saudi Crown Price, Mohammed bin Salman's order, OPEC was expected to give a cold shoulder to Maduro's call, multiple analysts commented following the reveal of OPEC response.

"Reports are emerging that PDVSA is scrambling to secure new markets for its crude, after the USA placed additional sanctions on the country", ANZ bank said on Monday.

Venezuela sanctions have arrived in a market that was already likely to be short of medium and heavy crudes because of US sanctions on Iran and OPEC's output cuts.

In the report, OPEC said its oil output fell by 797,000 bpd month on month to 30.806 million bpd in January.

Iranian heavy oil price increased $1.45 in January, according to OPEC's latest monthly report published on Tuesday.

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

But while Venezuela's crude now accounts for a very limited share of the global oil market, it plays a much more important role in the niche market for heavy crude.

Before U.S. sanctions came into force at the end of January, Washington shipped large amounts of naphtha to Venezuela.

Hassan Rouhani's government would face even a much worse scenario if the USA decides to bring Iran's oil exports down to zero.

The sudden embargo on Venezuela's exports has therefore sent refiners in the United States and elsewhere scrambling to find alternative supplies compatible with their equipment.

"Oil production is rapidly falling and companies that normally resell Venezuelan crude have not found ways to mitigate the effect of the U.S. sanctions", Barclays bank said.

John Kemp is a Reuters market analyst.

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