Oil prices edge up on hopes for US-China trade breakthrough

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

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.

International Brent crude oil futures were up 37 cents, or 0.6 percent, at $63.98 a barrel.

USA sanctions on Venezuela's state-owned oil company are tightening the global oil market and sending refiners around the world scrambling to find replacements for the country's diesel-rich heavy and extra heavy crudes.

Venezuela's crude production slumped from 3.8 million barrels per day in 1970 to just 1.7 million bpd in 1985, recovering to 3.4 million bpd in 1998 before slumping again to 2.1 million bpd in 2017.

Futures in NY closed up 1.5 percent, reaching the highest point in a week.

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.

On the supply side, Saudi Arabia, the defector leader of OPEC, said it was cutting daily production and exports by a further 500,000 barrels per day (bpd) on top of its agreed OPEC quota reduction.

Analysts say a rise in oil prices is good for the country that sank into recession a year ago as a result of sharp dip in oil prices.

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However, analysts are warning that record United States supply and anticipated economic slowdown later this year might start capping the world's oil markets.

Khalid al-Falih, 59, who is also chairman of Saudi Aramco, the state-owned oil group, said that the company meant to build an worldwide energy exploration and production business for the first time.

On Tuesday, the Saudis said it had cut its output by nearly 800,000 bpd in January to 30.81 million bpd.

US sanctions on Iran and Venezuela, together with OPEC's output cuts, have therefore removed mostly medium and heavy oils from the market, leaving lighter grades relatively unaffected.

Venezuela's diminished importance in the global oil market and as a supplier to the United States has emboldened the US administration to take a tough approach in attempting to oust the government of Nicolas Maduro.

The price has largely plateaued since then, in spite of the subsequent imposition of US sanctions.

Meanwhile, Barclays bank added, "Oil production is rapidly falling and companies that normally resell Venezuelan crude have not found ways to mitigate the effect of the US sanctions".

In the USA, oil inventories climbed 3.63 million barrels, while supplies of gasoline, heating oil and other fuels added about 3 million barrels more, according to weekly data from the Energy Information Administration. Analysts were looking for a build of about 2.300 million barrels.

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