Oil prices fall on rising United States rig count, IL refinery fire

Daily March WTI Crude Oil

Global oil supply decreased month-on-month in January by 1.03 million barrels per day (mb/d) to average 99.32 mb/d, preliminary data of the Organization of the Petroleum Exporting Countries (OPEC) showed on Tuesday.

Larger-than-expected production cuts by some major oil suppliers and falling seasonal crude inventories due to growing demand are set to push up oil prices, Goldman Sachs said.

"Crude-oil quality is another issue, and, in the wider context of supply in the early part of 2019, it is even more important". The group made a strong start to the strategy, slashing output by 930,000 bopd to the lowest in nearly four years, the IEA said.

The IEA noted that new U.S. sanctions announced in January on Venezuela's state oil company PDVSA have not so far caused market jitters.

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.

Oil prices are gaining on Tuesday as the OPEC-led supply deal and USA penalties against Iran and Venezuela begin to take hold after crude futures hit two-week lows earlier this week.

The latest short-term energy outlook "puts the nation on track to set a new production record for a third consecutive year", EIA Administrator Linda Capuano said in a statement.

The global oil market remains well supplied, the International Energy Agency said in its monthly market report on Wednesday, and output should still outstrip demand this year.

With more than 20 years' trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa.

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".

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

Refineries are built to handle a certain quality of crude, and those which process so-called heavy crude from Venezuela, Canada or the Middle East can not be easily converted to treat the light shale oil that is now being produced in greater quantities in the United States.

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.

"Disruptions have increased with risks that Venezuela's production decline accelerates following the introduction of additional US sanctions related to the Venezuelan oil industry", Reuters quoted the investment bank as saying.

John Kemp is a Reuters market analyst.

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