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OPEC squeezes oil output to 4-year low, Russian Federation compliance low

14 February 2019

Saudi Arabia plans to produce around 9.8 million barrels per day of oil in March, over half a million bpd below its pledged production level under a global supply-cutting deal, Energy Minister Khalid al-Falih told the Financial Times.

U.S. West Texas Intermediate (WTI) crude futures were at $53.76 per barrel at 2338 GMT, up 10 cents, or 0.2 percent, from their last settlement.

Oil prices rallied yesterday amid signs that the Organisation of Petroleum Exporting Countries (OPEC's) production cuts are taking hold.

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.

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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 on Wednesday. They closed up 1.5 percent on Wednesday, having touched their highest since February 5 at $54.60 a barrel.

The cartel made the pledge a year ago alongside major oil producing countries outside the cartel, including Russian Federation, to safeguard oil prices against a global economic slowdown.

The IEA also raised its estimate for the increase in non-OPEC crude supply in 2019 to 1.8 mbd, which is 0.3 mbd higher than previously.

IEA revised lower its forecast for demand for OPEC crude this year.

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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.

Oil descended into a bear market in November, a swift drop from four-year highs seen in October, as traders grew anxious over strengthening USA production and an outlook for softer global fuel demand.

Climbing U.S. oil stockpiles weighed on prices.

Saudi Arabia will reduce oil production to nearly 9.8 million barrels per day in March, Minister of Energy, Industry and Mineral Resources and Chairman of Saudi Aramco Khalid Al-Falih told the Financial Times.

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The rapid growth in United States production, led by shale oil output, has led to an unwelcome build-up in inventories of crude and refined products while refining margins for the gasoline it yields have collapsed around the world. Analysts were looking for a build of about 2.300 million barrels.

OPEC squeezes oil output to 4-year low, Russian Federation compliance low