Oil gets a boost from Saudi output pledge, declining U.S. inventories

Venezuela's President Nicolas Maduro gestures during a news conference at Miraflores Palace in Caracas Venezuela

West Texas Intermediate (WTI) crude saw a 0.42-percent rise to $52.63 a barrel, while Brent blend was up 0.44 percent and trading at $61.78 per barrel as of 06:34 GMT.

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.

Oil Storage Tanks at Cushing, OKThe global oil market will struggle this year to absorb fast-growing crude supply from outside OPEC, even with the group's production cuts and US sanctions on Venezuela and Iran, the International Energy Agency said in a report on Wednesday.

"Oil production is rapidly falling and companies that normally resell Venezuelan crude have not found ways to mitigate the effect of the USA sanctions", Barclays bank said. Forecasts for non-OPEC supply were lifted by an improved outlook for the Gulf of Mexico, while projections for global demand were lowered as a result of weakness in Europe and the Americas.

Goldman Sachs said on Tuesday, "With so far no sign of change in government, we see increasing risks that production losses could be larger and sooner than our forecast for a 0.33 million-bpd supply loss in 2019".

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

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 EIA, however, added a note of caution that US production would be capping oil price gains.

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.

Despite the political rifts between Venezuela and the United States, US refiners have in the past been some of the biggest buyers of Venezuelan crude.

In early Wednesday trade, oil prices were also supported by Tuesday's report of the American Petroleum Institute (API) which showed a small crude oil inventory draw of 998,000 barrels for the week ending February 8, compared to analyst expectations that predicted a build in crude oil inventories to the tune of 2.300 million barrels. Analysts were looking for a build of about 2.300 million barrels.

Venezuela was once a major oil exporter to the United States, but shipments have fallen from 1.4 million bpd in 1998 to around 500,000 bpd in 2018 ("Petroleum supply monthly", EIA, Jan 2019). -China trade and broader economic concerns, and the approach of seasonal refinery maintenance.

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