Nigeria’s crude oil production falls to 1.999m bpd

The Opec+ cuts are taking effect and US data is starting to reflect these changing market conditions. — Reuters  file

The Opec+ cuts are taking effect and US data is starting to reflect these changing market conditions. — Reuters file

In its monthly report released yesterday, OPEC said its crude output fell 797,000 barrels per day (bpd) in January compared with the prior month.

While yesterday's jawboning from OPEC continues to keep the oil complex bid.

Analysts said markets are tightening amid voluntary production cuts led by the Organization of the Petroleum Exporting Countries (OPEC) and because of USA sanctions on Venezuela and Iran.

Oil has advanced around 19 percent this year as the OPEC+ alliance of producers cut output, but the rally has sputtered in February amid record USA shale drilling.

Supply issues in OPEC-member Venezuela 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.

"Oil production is rapidly falling and companies that normally resell Venezuelan crude have not found ways to mitigate the effect of the United States sanctions", Barclays bank said. Analysts polled by Reuters forecast an increase of 2.7 million barrels.

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

OPEC+ is a 24-nation oil-producer coalition that includes Organization of the Petroleum Exporting Countries and nonmembers.

Hopes of a US-China trade deal have lent extra oxygen to crude oil prices in past sessions and this should remain a key driver in the very near term.

The U.S. administration likely calculated any fallout from sanctions on oil prices would be small given the limited volumes of crude involved and the expectation that the standoff would be resolved quickly.

Most new supply is coming from the United States, where crude production rose by more than 2 million bpd past year to a record 11.9 million bpd, making the country the world's biggest oil producer ahead of Russian Federation and Saudi Arabia.

Heavy crudes are much harder to refine and tend to contain significant quantities of sulfur and other impurities that are costly to remove, which is why they sell at a hefty discount to medium and light oils.

Middle distillates are used mostly in freight transportation as well as manufacturing, mining and farming, and are particularly valuable late in the business cycle when economic activity is near to the peak. Additionally, gains are being limited by weakening global demand.

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