Oil drops as global economic concerns grip market

Oil drops as global economic concerns grip market

Oil drops as global economic concerns grip market

The United States announced sanctions on Venezuela's state oil company last week, a move which has yet to push prices up steeply but could still spark gains.

Helping to underpin prices are the OPEC-led supply cuts and Washington's sanctions against Venezuelan crude exports. The WTI prices remained positive on Wednesday after the EIA inventory report joined hands with Venezuelan sanctions and supply outages at Canada and Mexico.

On Wednesday, the EIA reported that for the week ended February 1 that USA commercial crude oil inventories increased by 1.3 million barrels from the previous week.

Brent crude futures rose 62 cents, or 1 percent, to $62.60 a barrel by 11:33 a.m. EST (1633 GMT).

Energy information provider Argus Media, said producer cuts will eventually help level oil prices again as 2019 wears on.

"In a market that's looking for direction, there's concern that any slowdown in the manufacturing sector would slow down demand".

Meanwhile, oil supply from the Organization of the Petroleum Exporting Countries fell in January by the largest amount in two years, a Reuters survey found, as Saudi Arabia and its Gulf allies over-delivered on the group's supply-cutting pact while Iran, Libya and Venezuela registered involuntary declines. -China trade dispute have also weighed on the market.

Weighing on oil markets, US government data showed new orders for USA -made goods unexpectedly fell in November, with sharp declines in demand for machinery and electrical equipment.

The producers known as OPEC+ began cutting production by 1.2 million barrels per day from last month to avert a new supply glut and OPEC has delivered nearly three-quarters of its pledged cutback already, according to a Reuters survey.

A decline in OPEC production and a squeeze on supply from Iran and Venezuela from US sanctions have led many analysts to forecast that the market will be balanced in 2019.

Citgo, the eighth-largest USA refiner and Venezuela's top foreign asset, is in the middle of a tug of war as the Trump administration has made aggressive moves to remove it from Maduro's control.

"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. Oil fell on Tuesday after a survey showed euro zone business expansion almost stalled in January.

Senior U.S. and Chinese officials are poised to start another round of trade talks next week.

Related news