Even as oil producing states in OPEC and beyond begin implementing the output cuts they agreed in December, the world's need for their crude is shrinking further, suggesting that they will need to extend the deal through the second half of the year.
The combination of the OPEC-led production cuts, the increased reduction by the Saudis and in a limited way, the sanctions against Venezuela are helping to underpin prices, but in order to put the market over the top, demand is going to have to increase. Global oil cartel Opec said Tuesday it sharply reduced crude oil production last month, after heavyweight Saudia Arabia slashed output and exports fell in crisis-hit Venezuela. The United Arab Emirates and Kuwait were next according to the report.
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.
In the Organization of Economic Co-operation and Development (OECD), oil demand was revised down by 0.02 mb/d due to lower economic projections for OECD Americas in 1Q19 and OECD Europe for the whole of 2019, reads the report.
The Organization of the Petroleum Exporting Countries said on Tuesday it had cut output by nearly 800,000 bpd in January to 30.81 million bpd. The UAE lowered daily oil production by 146,000 barrels.
"Over the past two years, global oil demand has turned out to be higher than expected, supported by healthy economic activities, particularly in the OECD", said the report.More news: Rare black leopard spotted in Laikipia for first time
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On the supply side, the agency highlighted the headline factors that may drive crude lower in the coming quarters.
Brent crude futures rose $1.23 to $63.65 a barrel by 11:26 a.m. EST (1726 GMT).
"Energy commodity prices were mixed in January". As reported by The Financial Times, Saudi Arabia's energy minister Khalid al Falih went on to say that overseas expansion would become a critical part for the country. The kingdom is seeking to acquire oil and gas assets outside the country and is no longer focused only on monetizing its own resources, he said. Instead, the nationalized company now aims to become an global energy giant alongside companies like Royal Dutch Shell and British Petroleum.
USA crude oil inventories rose last week to the highest since November 2017 as refiners cut runs to the lowest since October 2017, the Energy Information Administration said.
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.