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Oil Prices Step Up As OPEC’s Supply Cut Grips Market

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Oil prices rose yesterday as markets tightened amid output cuts by producer club OPEC, but surging US supply and a global economic slowdown prevented crude from climbing further.

US West Texas Intermediate (WTI) crude oil futures were at $57.45 per barrel up 23 cents, or 0.4 per cent, from their last settlement, while the International Brent crude futures were at $66.55 per barrel, up 24 cents, or 0.4 per cent, just as traders said oil markets were currently tightening.

In Venezuela, suffering from a political and economic crisis, oil exports have plunged by 40 per cent to around 920,000 barrels per day (bpd) since the US government slapped sanctions against its petroleum industry on January 28.

This drop comes as the Organization of the Petroleum Exporting Countries (OPEC), of which Venezuela is a member, has led efforts since the start of the year to withhold around 1.2 million bpd of supply to prop up prices.

“Global (oil) markets appear tighter than many anticipated for this time of year, but scores of unsold barrels can pile up quickly and saturate regions,” Canada’s RBC Capital Markets said in a research note on oil markets.

Despite this, there are signs that point to a more amply supplied market heading further into 2019. The US Energy Department said on Thursday that it was offering up to 6 million barrels of sweet crude oil from the national emergency reserve in a sale mandated by a law to raise funds to modernise the US strategic oil reserves.

US crude output has hit a record of more than 12 million bpd, pushing exports to an unprecedented 3.6 million bpd in February.

Investment bank RBC said it estimated US “Houston barrels can economically move anywhere globally when priced at a discount of $1.70 per barrel relative to the waterborne Brent benchmark.”

Houston crude last traded at $6.60 a barrel over WTI, which still put it at a discount of more than $2.15 per barrel to Brent.

On the demand side, a Reuters poll showed this week that analysts expect global fuel demand to stutter this year, which would weigh on crude oil prices, amid a broad economic slowdown.

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