Oil prices rose on Wednesday as OPEC said it had cut supply deeply in January and as U.S. sanctions hit Venezuela’s oil exports.
U.S. West Texas Intermediate (WTI) crude oil futures were at US$53.60 per barrel, up 50 cents, or 0.9 per cent, from their last close.
International Brent crude futures were up 0.8 per cent, or 51 cents, at US$62.93 per barrel.
Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore, said oil prices were boosted after “Saudi Arabia announced it was cutting daily production and exports by a further 500,000 barrels per day (bpd) on top of its agreed OPEC quota cut.”
The Organization of the Petroleum Exporting Countries (OPEC), which Saudi Arabia de-facto leads as the world’s top crude oil exporter, said on Tuesday that it had cut its output by almost 800,000 bpd in January to 30.81 million bpd.
Supply issues in Venezuela, another OPEC member, are also bolstering oil prices as the South American country suffers apolitical and economic crisis, with Washington introducing petroleum export sanctions against state-owned energy firm PDVSA.
Despite the political rifts between Venezuela and the United States, U.S. refiners have in the past been some of the biggest buyers of Venezuelan crude.These customers have fallen away after Washington imposed sanctions earlier this year.
Venezuela has tried to find alternative customers,especially in Asia, but under U.S. pressure many buyers there are also shying away from dealing with PDVSA.
“Oil production is rapidly falling and companies that normally resell Venezuelan crude have not found ways to mitigate the effect of the U.S. sanctions,” Barclays bank said in a note issued on Tuesday.
Despite the OPEC cuts and crisis in Venezuela, analysts said global oil markets remain well-supplied.
“Oil markets continue to focus at the macro level on the dual notions of adequate supply and softening demand,” Frank Verrastro, senior vice president for the Energy and National Security Program at the Center for Strategic and International Studies (CSIS), a U.S. think-tank, said in a note.
He added that markets were amply supplied due to “adequate global oil inventories, the prospect of weakened demand tied both to U.S.-China trade and broader economic concerns, the approach of seasonal refinery maintenance – when crude oil demand declines – and an influx of new supply from the United States and elsewhere.”