Published: Thu, February 14, 2019
Money | By Arnold Ball

Oil prices rise on Sino-American trade hopes, upbeat China data

Oil prices rise on Sino-American trade hopes, upbeat China data

"In terms of crude-oil quantity, markets may be able to adjust after initial logistical dislocations", said the Paris-based IEA, which advises major economies on energy policy.

Brent crude futures were up $0.77 at $63.19 a barrel by 1225 GMT while USA crude oil futures rose $0.53 to $53.63 a barrel.

It now sees global oil demand rising by 1.37 million barrels a day on average in 2019 compared with 2018.

Oil prices gained almost two percent on Tuesday, supported by OPEC-led production cuts which Saudi Arabia said it would surpass by over half a million barrels per day (bpd) and by USA sanctions against Iran and Venezuela.

Venezuela, which has the world's largest proven oil reserves, typically produces extra heavy oil.

Given the six- to eight-week sailing time between the Latin American country and destinations in Asia, it's likely that the pinch of US sanctions will only be felt in April, given that all February cargoes and most of March's are already en route. This would help the oil-rich, but cash-poor, country dilute its extra heavy oil for export around the world.

"It is supported by lower prices and the start-up of petrochemical projects in China and the U.S. Slowing economic growth will, however, limit any upside", the agency said. Venezuela announced that it would sell more oil to India.

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Oil prices fell by more than 1 percent on Monday as U.S. drilling activity picked up and as a refinery fire in the USA state of IL resulted in the shutdown of a large crude distillation unit. "In quality terms, it is more complicated".

It also slightly downgraded its forecast for growth in global demand in 2019 from 1.29 million barrels per day to 1.24 million.

US bank Morgan Stanley said the surge in USA crude oil production, which tends to be light in quality and which rose by more than 2 million barrels per day (bpd) past year to a record 11.9 million bpd, had resulted in overproduction of gasoline. OPEC members (excluding Iran, Venezuela and Libya) are responsible for two thirds of production cut.

OPEC is partnering with 10 non-member nations, including Russian Federation, to keep 1.2 million bpd off the market.

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.

The decrease by the group of 14 producer countries - which has long manipulated oil output to influence global prices in members' favor - brought total production to 30.81 million barrels per day in the month, the report said citing secondary sources.

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