Oil Rises After Saudi Pledge, Declining U.S. Inventories
Oil prices rose on Wednesday after top exporter Saudi Arabia said it would cut crude exports and deliver an even deeper cut to its production, and after an industry group reported a surprise decline in U.S. oil inventories.
Brent crude, the global benchmark, was up $1.07, or 1.7 percent, at $63.49 a barrel at 9:55 a.m. EST (14:55 GMT), while U.S. West Texas Intermediate futures were up 91 cents, or 1.7 percent, at $54.01.
"The feel-good factor is back in play but oil bulls are by no means out of the woods yet," PVM Oil Associates Stephen Brennock said.
"It is a well-known fact that the world economy is losing momentum amid a plethora of downside risks including lingering US-China trade tensions and geopolitical uncertainty."
On Tuesday, the American Petroleum Institute (API) said U.S. crude inventories fell by 998,000 barrels in the latest week, trouncing forecasts by analysts in a Reuters poll for a rise of 2.7 million barrels.
The U.S. Energy Information Administration (EIA) is scheduled to release its weekly data at 10:30 a.m. EST (1530 GMT) on Wednesday.
U.S. crude output is expected to grow by 1.45 million barrels per day (bpd) this year and by another 790,000 bpd next year to hit 13 million bpd in 2020, according to the EIA
The growth, led by U.S. shale oil output, has built up global inventories of crude and refined products. Refining margins for gasoline have collapsed.
The Organization of the Petroleum Exporting Countries (OPEC) said on Tuesday it had cut output by almost 800,000 bpd in January to 30.81 million bpd. Saudi Arabia is responsible for most of that reduction.
On Tuesday, Saudi Energy minister Khalid al-Falih told the Financial Times production would fall below 10 million bpd in March, more than half a million bpd below the target it agreed to.
U.S. restrictions on Venezuela's energy sector should remove some 330,000 bpd in supply this year, according to Goldman Sachs.
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 U.S. sanctions on Venezuela's energy sector.
The global oil market remains well supplied, the International Energy Agency said in its monthly market report on Wednesday, and output should still outstrip demand this year.
"Oil prices have not increased alarmingly because the market is still working off the surpluses built up in the second half of 2018," the IEA said.
"In quantity terms, in 2019, the U.S. alone will grow its crude oil production by more than Venezuela's current output. In quality terms, it is more complicated. Quality matters."
Venezuela has tried to find alternative customers, especially in Asia, but under U.S. pressure many buyers there are also shying away from dealing with PDVSA.
(Reuters, Reporting by Amanda Cooper in London and Henning Gloystein in Singapore; Editing by Alexandra Hudson, David Evans and David Gregorio)