Opec tightens its taps as global oil demand stalls

Crude Oil

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, majority in Asia.

The country's average heavy oil price was $56.29 in January, up 2.6 percent from $54.84 in December 2018.

USA bank Morgan Stanley said the surge in us crude oil production, which tends to be light in quality and which rose by more than 2 million barrels per day (bpd) a year ago to a record 11.9 million bpd, had resulted in overproduction of gasoline.

"In quantity terms, in 2019, the US alone will grow its crude oil production by more than Venezuela's current output".

The country's average heavy crude price was also reported to be $56.29 since beginning of 2019 up to the report's publishing day.

The oil price has risen by 20 percent so far this year, yet most of that increase came in early January, before the imposition of USA sanctions on Venezuela's energy sector.

Iran's January oil production is the lowest level since October 2014, during the tightest period of previous round of worldwide sanctions (2012-2016), imposed on Iran's oil exports.

In the meantime, the political rift between Venezuela and the United States continues with the US sanctions against the South American nation giving prices a slight boost. OPEC's share of that cut is 800,000 bpd.

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The political crisis in Venezuela risks disrupting global crude markets as the type of oil pumped by the OPEC member becomes increasingly scarce, according to the International Energy Agency.

USA crude oil inventories rose last week to the highest since November 2017 as refiners cut runs to the lowest since October 2017, the Energy Information Administration said. Even 1.5 million barrels puts Iran's economy in a bind and anything less than that will make the budget hard to manage.

While the region, which accounts for about half of the world's refining capacity, is still able to source oil, it's becoming harder to get hold of the grades of crude that many Asian refiners prefer.

The biggest impact on demand will be a U.S.

Just months earlier, they had relaxed production caps as prices shot higher on market worries about the impact of United States sanctions on Iran.

Oil descended into a bear market in November, a swift drop from four-year highs seen in October, as traders grew anxious over strengthening U.S. production and an outlook for softer global fuel demand.

Back in December, OPEC and 10 other producers let by Russian Federation agreed to restrict oil production collectively by 1.2 million barrels a day for the first half of 2019.

The IEA noted that new U.S. sanctions announced in January on Venezuela's state oil company PDVSA have not so far caused market jitters.

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