Saudi Output Pledge Results in Oil Boost

13 February, 2019, 21:42 | Author: Billie Castillo
  • Venezuela's President Nicolas Maduro attends a military exercise in Charallave

Saudi Arabia's Energy Minister, Khalid al Falih, told the Financial Times that the kingdom would reduce production to about 9.8million bpd in March, down from a record high of 11.1million bpd in November.

USA sanctions on Venezuela's state-owned oil company are tightening the global oil market and sending refiners around the world scrambling to find replacements for the country's diesel-rich heavy and extra heavy crudes. "Crude-oil quality is another issue, and, in the wider context of supply in the early part of 2019, it is even more important".

The U.S., Venezuela's biggest customer, is banning oil imports from the country as it condemns President Nicolas Maduro for fraudulently clinging to power after disputed elections.

Oil prices have struggled to rise amidst an oversupplied market.

The "call" on OPEC crude is now forecast at 30.7 million bpd in 2019, down from the IEA's last estimate of 31.6 million bpd in January.

The moderate growth is reportedly tied to the voluntary output cuts led by the Organization of the Petroleum Exporting Countries (OPEC) and its non-OPEC allies.

The U.S. administration reimposed sanctions against the Islamic Republic's oil exports in November in a bid to ramp up pressure against Tehran's nuclear programme, but extended waivers to eight major buyers of Iranian crude, a lot of them in Asia.

Oil prices rose on Wednesday as producer club Organisation of the Petroleum Exporting Countries (OPEC) said it had cut supply deeply in January and as U.S. sanctions hit Venezuela's oil exports.

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Venezuelan armed-forces backed Socialist president, Nicholas Maduro had been in the pursuit of OPEC support against USA sanctions inclined on country's oil industry, as Maduro sent a letter to OPEC headquarter on January 29th, citing the impact of sanctions on oil prices and the potential risk, the sanction could forge for other OPEC nations, revealed by a Reuters' reporter later on Monday (February the 11th).

Output has gone into free fall as the country's isolation has increased, shrinking from 2.4 million bpd in 2016 to 2.0 million bpd in 2017 and 1.5 million bpd in 2018, according to the Joint Organisations Data Initiative.

Numerous region's refineries are new and are optimised to process heavy and sour crudes.

"In terms of crude oil quantity, markets may be able to adjust after initial logistical dislocations (from Venezuela sanctions)", the Paris-based IEA said.

With the actual loss of Venezuelan and some Middle Eastern crude, and the potential loss of Iranian barrels, the dilemma for Asian refiners becomes more acute.

The Tuesday report estimated that non-Opec members would produce more oil than expected this year, particularly in the Gulf of Mexico and the United States.

John Kemp is a Reuters market analyst.

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