OPEC squeezes oil output to 4-year low, Russia compliance low

Crude Oil

Crude Oil

Venezuela's crude production slumped from 3.8 million barrels per day in 1970 to just 1.7 million bpd in 1985, recovering to 3.4 million bpd in 1998 before slumping again to 2.1 million bpd in 2017.

The combination of the OPEC-led production cuts, the increased reduction by the Saudis and in a limited way, the sanctions against Venezuela are helping to underpin prices, but in order to put the market over the top, demand is going to have to increase.

The Organisation of Petroleum Exporting Countries (Opec) said it tightened its crude taps to cut nearly 800,000 barrels a day from its oil exports in January after vowing to drain excess oil from the oversupplied market.

US crude oil production remained at a record of 11.9 million barrels per day (bpd).

However, analysts are warning that record United States supply and anticipated economic slowdown later this year might start capping the world's oil markets.

"In terms of crude oil quantity, markets may be able to adjust after initial logistical dislocations (from Venezuela sanctions)", the Paris-based IEA said. On Monday, April Brent crude futures dropped around one percent, reaching minimum since January 29.

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"The imposition of sanctions by the United States against Venezuela's state oil company Petroleos de Venezuela (PDVSA) is another reminder of the huge importance for oil of political events", the IEA said. Analysts polled by Reuters forecast an increase of 2.7 million barrels.

Oil climbed for a second day as dwindling shipments from two of the world's biggest crude exporters eclipsed another big jump in US supplies.

Sanctions announced last month prohibit US corporations and persons from financial transactions with state-owned oil company PDVSA.

Oil prices rose on Thursday, buoyed by hopes that potential progress in the latest Sino-U.S. tariff talks would improve the global economic outlook, and as China's trade figures including crude imports beat forecasts.

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.

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.

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