Global oil supply falls in January '19: OPEC

OPEC cuts & US sanctions against Iran and Venezuela boosting global crude prices

Opec tightens its taps as global oil demand stalls

The surprise move was created to bar President Nicolas Maduro's access to oil revenue that has helped his embattled administration remain in power.

Falih pointed out that the state-owned oil company "Saudi Aramco" was planning to develop an global energy exploration and production business, stressing that the overseas expansion would be the company future's "core pillar".

"Even so, headline benchmark crude oil prices have hardly changed on news of the sanctions".

OPEC production fell to a four-year low in January as the cartel applied a new pact to boost global oil prices, the International Energy Agency said Wednesday, but Russian Federation and other ex-Soviet states failed to cut back output as much as promised.

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This represents a premium of $4.21 a barrel for the light crude, but this is down from a gap of $6.18 as recently as early October past year, and $7.26 at the start of 2018.

US sanctions on Iran and Venezuela, together with OPEC's output cuts, have therefore removed mostly medium and heavy oils from the market, leaving lighter grades relatively unaffected.

The bank also said that crude supply was being disrupted by US sanctions that kicked in last month on Venezuela's oil exports.

"Oil prices have not increased alarmingly because the market is still working off the surpluses built up in the second half of 2018", the IEA said. The price has largely plateaued since then, in spite of the subsequent imposition of US sanctions. WTI Crude, according to Goldman Sachs, will average US$55.50 a barrel, compared with an earlier estimate of US$64.50 a barrel.

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In the two weeks since the sanctions were announced, Venezuela's crude exports have reportedly tapered off and shifted toward to cash-paying buyers - such as India.

The IEA left its demand growth forecast for 2019 unchanged from its last report in January at 1.4 million barrels per day. But a shortfall of heavy-sour crude can cause complications for many refiners, such as those along the U.S. Gulf Coast, configured to process it. It has been extended several times and, under the latest deal, participants are cutting output by 1.2 million bpd until the end of June.

Opec members vowed to cut 800,000 barrels a day of that amount, so January's figures fell just 3,000 barrels short of that commitment.

The recent developments in the crude oil market have all but eliminated the discount enjoyed by heavy crudes, and in some cases, physical cargoes of some heavy grades have traded at premiums to light crudes.

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Oil prices gained almost two percent on Tuesday, supported by OPEC-led production cuts which Saudi Arabia said it would surpass by over half a million barrels per day (bpd) and by USA sanctions against Iran and Venezuela.

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