Oil remains bid in Asia on Venezuela sanctions and OPEC output cut

Oil remains bid in Asia on Venezuela sanctions and OPEC output cut

Oil remains bid in Asia on Venezuela sanctions and OPEC output cut

The global oil market will struggle this year to absorb fast-growing crude supply from outside the Organization of the Petroleum Exporting Countries (OPEC), even with the group's production cuts and US sanctions on Venezuela and Iran, the International Energy Agency said in a report on Wednesday. Venezuela announced that it would sell more oil to India. OPEC countries demonstrated an unequal level of oil production cuts as of the end of January and reduction rates need to be expedited, OPEC Secretary General Mohammad Barkindo said on Tuesday in a statement released by the Secretariat's press service.

In that letter to OPEC on January 29th, a day before United States inclined sanctions on Venezuelan state-owned oil firm PDVSA, Maduro wrote, "Our country hopes to receive the solidarity and full support of the member countries of OPEC and its ministerial Conference, in the fight we are now having against the illegal and arbitrary intrusion of the United States in the internal affairs of Venezuela".

Numerous region's refineries are new and are optimized to process heavy and sour crudes.

At 07:56 GMT, April WTI crude oil is trading $53.82, up $0.35 or +0.65% and April Brent crude oil is at $62.94, up $0.52 or +0.83%.

The fear of crude prices dropping into the $40s or lower has faded. "Since the U.S. sanctions against Venezuela were announced, the premium of Mars over WTI has soared from $4.50/bbl to over $7.50/bbl".

The industry's three main agencies are unanimous in reducing their assessments of the volume of oil the world will need from OPEC countries this year compared with what they were forecasting last month.

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But Asia is facing the loss of nearly 700,000 bpd of heavy crude from Venezuela by April, coincidentally the same month that Trump's waivers on Iranian crude exports are due to expire.

US crude inventory has been hovering between 430 and 450 million barrels since early December - and remains around 6% above the five year average for this time of year. The Energy Information Administration will issue its report on Wednesday.

Oil prices have struggled to rise amidst an oversupplied market. Because light sweet oil from Texas produces relatively more gasoline, prices for gasoline around the world have dropped relative to diesel.

In turn, this spurred OPEC and its allies to impose new output restrictions at a meeting in early December, with these cuts to take effect from January. "With heavy barrels being removed from the market, refiners have to pay more".

Any economic slowdown could cap oil markets. The dense crudes are much more hard to refine and tend to contain significant quantities of sulfur and other impurities that are costly to remove.

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