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

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

An oil pump is seen at sunset outside Scheibenhard, near Strasbourg, France, October 6, 2017.

It also slightly downgraded its forecast for growth in global demand in 2019 from 1.29 million barrels per day to 1.24 million.

Brent crude rose two per cent to $62.74 a barrel. The global benchmark earlier touched a session high of $63.98, but pulled back after the data was released.

United States prices were also supported by a report from the American Petroleum Institute (API) on Tuesday showing that crude inventories fell by 998,000 barrels in the week to 8 February to 447.2 million, compared with analyst expectations for an increase of 2.7 million barrels.

"There was a recovery in crude oil prices, in tandem with improving global financial market sentiment, particularly following a shift towards a more patient approach in regard to interest rate increases by the US Federal Reserve", added the report. "The market is holding up because of the outside markets, the hope for a trade deal, and a strong Dow", he said. Market sentiment has turned positive - for the time being.

"It's a little bit on the bearish side", Saal said.

On Tuesday, OPEC announced that it had succeeded in reducing production by 800,000 barrels per day in January, to 30.81 million barrels per day. The United Arab Emirates and Kuwait were next according to the report.

"It is a well-known fact that the world economy is losing momentum amid a plethora of downside risks including lingering US-China trade tensions and geopolitical uncertainty".

Additionally, the International Energy Agency said energy market participants may be able to adjust to US sanctions against Venezuela's crude industry.

USA crude output is accelerating, highlighting OPEC's dilemma as the cartel reins in its own production to revive prices.

The cartel made the pledge a year ago alongside major oil producing countries outside the cartel, including Russian Federation, to safeguard oil prices against a global economic slowdown.

"Oil prices have not increased alarmingly because the market is still working off the surpluses built up in the second half of 2018", the IEA said.

"In terms of crude oil quantity, markets may be able to adjust after initial logistical dislocations (from Venezuela sanctions)", the Paris-based IEA said. But a shortfall of heavy-sour crude can cause complications for many refiners, such as those along the U.S. Gulf Coast, configured to process it.

OPEC also said that it expected the world's appetite for oil to grow by 1.24 million barrels, around a 1.3 percent increase in global annual demand, which is expected to reach 100 million barrels in 2019.

  • Eleanor Harrison