U.S. House panel passes bill targeting OPEC oil supply cuts

Jermaine Castillo
February 8, 2019

Crude oil prices in the meantime remain volatile although not as volatile as some expected after the announcement of the latest round of sanctions by Washington against Caracas.

Oil prices rose about 1 percent on Wednesday, boosted by signs of strong U.S. demand for distillate products and tightening global crude supply, but gains were capped by a rising USA dollar and ongoing concerns about a global economic slowdown, Trend reports citing Reuters. The government's official supply report is due later on Wednesday.

A day after the American Petroleum Institute disappointed oil bulls by reporting an estimated inventory build across the board, the Energy Information Administration deepened the mood by saying US crude oil inventories added 1.3 million barrels in the week to February 1.

U.S. West Texas Intermediate (WTI) crude futures were at $54.77 per barrel at 0223 GMT, up 21 cents or 0.4 percent.

"Basically it's a pretty supportive report", said Phil Flynn, oil analyst at Price Futures Group in Chicago.

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USA crude was down 39 cents at $53.27 U.S.

Energy information provider Argus Media, said producer cuts will eventually help level oil prices again as 2019 wears on. Concern about potentially slowing demand for crude oil has contributed to price reductions.

Venezuela, like other OPEC members Iran and Libya, was exempted from making voluntary curbs under the deal on expectations that its output faced involuntary downward pressure in 2019.

Moreover, supply cuts by the Organization of the Petroleum Exporting Countries and its allies, including Russian Federation, have been supporting prices.

Global economic worries have weighed on market sentiment in recent days, offsetting support from signs that global supplies are tightening.

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That focuses yet more attention on the outcome of U.S. Oil fell on Tuesday after a survey showed euro zone business expansion almost stalled in January.

Meanwhile, OPEC data shows that while Q4 2018 oil output was flat quarter-on-quarter, there was a sizable decline in output in December, by 750 thousand bpd month-on-month.

"We believe that financial markets may be overestimating the risks of a global recession", said Jean-Pierre Durante, Head of Applied Research at Pictet Wealth Management.

About a dozen tankers carrying over 7 million barrels of Venezuelan crude and products were anchored this week at the U.S Gulf Coast waiting for directions on how to pay for the cargoes following the sanctions, according to Refinitiv Eikon data.

Adding to the bearish sentiment, CNBC reported that a meeting between President Donald Trump and his Chinese counterpart Xi Jinping was "highly unlikely" before the March 1 deadline set by the US for reaching a trade deal.

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