Global oil supply to swamp demand in 2019 despite output cuts - IEA

The Opec+ cuts are taking effect and US data is starting to reflect these changing market conditions. — Reuters  file

The Opec+ cuts are taking effect and US data is starting to reflect these changing market conditions. — Reuters file

Despite the OPEC cuts and crisis in Venezuela, analysts said global oil markets remain well supplied. U.S. West Texas Intermediate (WTI) crude oil futures rose 89 cents or 1.7 percent to 53.30 U.S. dollars.

The Organization of the Petroleum Exporting Countries (OPEC) this week said it had cut oil production steeply under a global supply deal, curbing output by nearly 800,000 barrels per day in January to 30.81 million bpd.

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

The cartel and the world's biggest exporter, Saudi Arabia, slashed its output more than expected under the OPEC deal, to 10.2 million barrels a day in January and is aiming to pump around 100,000 barrels less in February.

The U.S. administration likely calculated any fallout from sanctions on oil prices would be small given the limited volumes of crude involved and the expectation that the standoff would be resolved quickly.

Meanwhile, Barclays bank added, "Oil production is rapidly falling and companies that normally resell Venezuelan crude have not found ways to mitigate the effect of the US sanctions".

Energy market participants may be able to adjust to USA sanctions against Venezuela's crude industry, the IEA said in its closely-watched report on Tuesday.

"This report is bearish", said Phil Flynn an oil analyst at Price Futures Group in Chicago.

If refiners are unable to source enough heavy and extra heavy crude, they will buy the next best alternative, in this case medium density crudes, so the impact of sanctions is rippling through the entire oil market.

"Disruptions have increased with risks that Venezuela's production decline accelerates following the introduction of additional USA sanctions related to the Venezuelan oil industry", the investment bank said.

OPEC's Vienna-based research department reduced its estimates for the average amount of crude the world requires from the group this year by 240,000 barrels a day to 30.59 million.

Brent has struggled to sustain gains this month following its best ever start to a year on concern that booming shale output will undermine cuts by OPEC and its partners, and fears that the U.S.

Non-OPEC production growth, especially US shale boom has left less room for OPEC members to keep their production high. -China trade deal. That may be in the works, but it could take several months to feel its influence.

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