Oil edges up as market eyes tighter supply

Jeannie Matthews
February 7, 2019

US government data on Wednesday showed that domestic crude inventories rose less than expected last week even as refineries hiked output.

In an interview with Sputnik, Venezuela's National Representative to OPEC, the technical adviser at Venezuela's PDVSA company and Petroleum Ministry Ronny Romero spoke about the impact of the U.S. sanctions on the oil and gas giant.

A maze of crude oil pipes and valves is pictured during a tour by the Department of Energy at the Strategic Petroleum Reserve in Freeport, Texas, U.S. June 9, 2016.

Crude oil prices edged lower on Monday after sharp gains during the previous session but were supported by expectations of shrinking supply and signs that China-US trade tensions could ease.

Oil prices fell on Monday after disappointing USA factory data sparked fresh concerns about a slowdown in the global economy, but losses were limited as OPEC-led supply cuts and us sanctions against Venezuela pointed to tighter supply. The government's official supply report is due later on Wednesday.

Despite hitting a 2-month high last week, crude oil prices have been chopping inside a tight range for several days as investors try to determine the key catalyst in the market at this time.

United States oil imports from Opec countries have dropped to five-year lows as the oil producing cartel cuts output, while U.S. domestic production grows.

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The oil industry generally believes the curbs will help balance the market this year.

OPEC, Russia and other non-OPEC producers - an alliance known as OPEC+ - agreed in December to reduce supply by 1.2 million barrels per day (bpd) from January 1.

While U.S. sanctions on Venezuela threaten to accelerate an already steep slide in production, neighboring Guyana's output is poised to reach 750,000 barrels a day by 2025, according to an estimate from Exxon Mobil Corp.

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

OPEC oil supply fell in January by the largest amount in two years despite sluggish production declines from Russian Federation, according to a Reuters survey.

Market participants are also watching for developments surrounding the U.S.

Scott Shellady, senior vice president at TJM Institutional Services, voiced the provocative suggestion that the market of late "is really taking a long term view" and that traders are anticipating that geopolitical events such as Venezuela will have specific outcomes (like Maduro losing control of the country and massive amount of crude coming back on line as a result).

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