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OPEC Secretary General urges to accelerate oil production cuts within OPEC+ framework

14 February 2019
OPEC Secretary General urges to accelerate oil production cuts within OPEC+ framework

Goldman Sachs said on Tuesday, "With so far no sign of change in government, we see increasing risks that production losses could be larger and sooner than our forecast for a 0.33 million-bpd supply loss in 2019".

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

Given that much of the heavy lifting of the output restrictions will fall on OPEC's top producer Saudi Arabia, and fellow Middle East producers Kuwait and the United Arab Emirates, it's likely that the barrels lost will be heavy, or medium-heavy crudes.

If the two sides do not come to an agreement by the deadline, US tariffs on $200 billion worth of Chinese imports are scheduled to increase to 25 percent from 10 percent.

But a bill in the U.S. Congress to enable the Justice Department to sue OPEC+ members for antitrust violations has the potential to disrupt OPEC efforts to limit oil supply.

Supply issues in Venezuela, another OPEC member, are also bolstering oil prices as the South American country suffers a political and economic crisis, with Washington introducing petroleum export sanctions against state-owned energy firm PDVSA.

"China trade and broader economic concerns, the approach of seasonal refinery maintenance - when crude oil demand declines - and an influx of new supply from the United States and elsewhere".

Speaking in an interview with The Financial Times, Al-Falih added that the kingdom would also reduce its oil production to 9.8 million bpd next month, over half a million bpd below its pledged production level under a global supply-cutting deal reached in December between the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russian Federation.

One key uncertainty in the crude oil market is Venezuela.

"Even so, headline benchmark crude oil prices have hardly changed on news of the sanctions".

The American Petroleum Institute (API) reported a smaller-than-expected draw of 998,000 barrels during the week-ending February 8. It has been extended several times and, under the latest deal, participants are cutting output by 1.2 million bpd until the end of June. Distillate inventories decreased by 2.481 million barrels versus an expected draw of 1.090 million barrels.

While remaining volatile, oil prices have rallied to just above $60 a barrel and jumped more than a dollar after the Opec production update.

The growth, led by USA shale oil output, has built up global inventories of crude and refined products.

Mars, a medium crude grade from the U.S. Gulf, has moved to a rare premium over Louisiana Light Sweet. -China trade discussions also boosted futures.