India Targets Saudi Investment In Strategic Oil Storage

The International Energy Agency

The International Energy Agency

Crude oil prices have been trending higher today on the back of falling Venezuelan and Iranian production, squeezed by USA sanctions, and also thanks to an update from Saudi Arabia that it plans to continue cutting its production deeper than it agreed on last December to support prices.

India is seeking investment from Saudi Arabia to build emergency crude reserves that will act as a buffer against volatility in oil prices and supply disruptions for the third-largest oil consumer.

Brent crude futures were at $66.75 per barrel, up 17 cents, or 0.3 per cent.

The slowdown in drilling points to more timid output growth going forward, but because the overall drilling level remains relatively high despite the recent decline, many analysts still expect USA crude output to rise above 13 million bpd soon. "Additional buoyancy has come from news that the massive power outage in Venezuela is also hampering the country's oil exports".

Last December, OPEC members and their non-OPEC allies agreed to cut a total of 1.2 million barrels of crude oil from their supplies based on the October production levels. Since then, Brent has surged 25%.

America will add 4m barrels per day (bpd) of oil, mostly from the prolific Permian Basin in Texas.

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Despite the gains, commodities markets were somewhat held back after USA employment data raised concerns that an economic slowdown in Asia and Europe was spilling into the United States, where growth has so far still been healthy. Furthermore, the recent price action and the market's ability to regain its composure after recent concerns over demand drove prices lower, suggest that any further tightening in the physical crude balance could lead to a new high for the year over the near-term.

Venezuela's state-run oil firm PDVSA has been unable to resume crude exports from its primary port since a power outage last week, people familiar with the matter shared on Monday.

The International Energy Agency said United States shale oil will make up 70pc of the extra global crude supply by 2024, eating into the market share of Opec and Russian Federation.

Crude inventories fell by 3.9 million barrels in the last week, compared with analysts' expectations for an increase of 2.7 million barrels.

The first report, from the American Petroleum Institute, an industry group, was due out 2030 GMT, followed by the government's official supply report on Wednesday.

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