Oil steadies as investors weigh up odds of global supply squeeze

Oil steadies as investors weigh up odds of global supply squeeze

Analysts said that USA sanctions on Venezuela had focused market attention on tighter global supplies.

Output declines from the Organization of the Petroleum Exporting Countries (OPEC) as they make good on their pact to curb a supply overhang were compounded by falling USA oil rig counts and sanctions on Venezuelan oil sales.

The oil price also came under pressure as weekly data published by the U.S. Energy Information Administration on Wednesday showed an unwelcome increase in stocks of crude oil.

Brent crude, the global benchmark, slipped 49 cents to $61.49 a barrel as of 1053 GMT.

Earlier, oil price came under pressure following weekly data showing rise in U.S. stocks.

"The fact that USA crude oil and gasoline stocks rose more sharply than expected, as reported by the API after close of trading yesterday, is weighing on prices", said Carsten Fritsch, analyst at Commerzbank.

US West Texas Intermediate (WTI) futures were at $55.13 per barrel, down 13 cents, or 0.24 percent, from their last settlement.

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"Fresh U.S. sanctions on the country could see 0.5-1 percent of global supply curtailed", said Vivek Dhar, mining and energy analyst, Commonwealth Bank of Australia. Production last month declined to 11.38 million barrels per day (bpd), but that was only down by 35,000 bpd from its October 2018 level that is the baseline for the pact.

USA sanctions on Venezuela's state oil company could also lift prices, though they have yet to trigger any sharp increase.

Venezuela, like fellow OPEC members Iran and Libya, was exempt from production curbs under the OPEC+ deal on expectations that its output faced involuntary downward pressure in 2019.

Crude is unwinding yesterday's rally, as economic concerns rise up once more and a stronger dollar provides headwinds, Matt Smith, director of commodity research at ClipperData, told UPI. -China trade deal. An economic slowdown in the Euro Zone is now a concerns after German industrial output unexpectedly fell in December for the fourth consecutive month. Oil fell on Tuesday after a survey showed euro zone business expansion almost stalled in January. The daily average exports of crude oil over the past four weeks were about 2.5 million barrels, up by about 1 million barrels per day year-on-year.

With a nervous market, traders are focused on the U.S. State of the Union address by President Donald Trump.

"The market is being boosted by optimism over the higher-level trade talks between the United States and China that were completed on January 31".

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