Oil Holds Gain as Saudi, Venezuela Supply Cuts Eclipse U.S. Boom

Crude Oil

Since January 1, an OPEC-led group has been cutting at least 1.2 million barrels per day from production in an effort to trim the global supply and stabilize prices.

OPEC members along with allies including Russian Federation agreed in early December to trim production by 1.2 mbd from January 1, in a bid to eliminate a production glut and shore up prices.

Most of that reduction has been thanks to Saudi Arabia.

Compliance by non-OPEC participants was only 25 percent, however, it said.

According to IEA data Russian Federation made only 18 percent of its pledged cut of 0.23 mbd.

Kazakhstan increased production, while Azerbaijan only cut 15 percent of what it had promised.

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

However, the Organisation of Petroleum Exporting Countries, OPEC, in its latest monthly oil report released on Tuesday, said Nigeria's oil production dropped to 1.687 million bpd in January from 1.797 million bpd.

Not all data pointed to tighter market conditions and higher prices.

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Those fears dissipated after Washington eventually granted waivers allowing several countries to continue to import Iranian oil.

USA 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.

The move has created disruption for some refiners, but has not led to a dramatic increase in the oil price in 2019.

IEA figures show Venezuala's output dropping by roughly 30,000 barrels per day to 1.26 mbd.

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.

The ongoing closure of parts of the Keystone pipeline that brings Canadian oil into the United States also helped prop up WTI, traders said.

"So far, there are no signs that other producers, e.g".

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.

The March production figure means Saudi would be voluntarily cutting output by more than 500,000 bpd below its pledged production level under a deal between the Organization of the Petroleum Exporting Countries and allies led by Russian Federation.

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