Brent oil prices rose on Wednesday, after top exporter Saudi Arabia said it would cut crude exports and deliver an even deeper cut to its production, while us futures gained on a decline in domestic oil inventories.
Venezuela's production has nearly halved in two years to 1.17 million bpd, as an economic crisis decimated its energy industry and USA sanctions have now crippled its exports.
The country's average heavy crude price was also reported to be $56.29 since beginning of 2019 up to the report's publishing day.
American supply growth this year will exceed Venezuela's total output, the IEA said, another signal that OPEC's efforts to buoy prices may ultimately prove self-defeating.
Like Iran, another founding member of the Organization of the Petroleum Exporting Countries, Venezuela's oil industry has been blighted by mismanagement, unrest, political instability, diplomatic isolation and sanctions.
According to the decision the OPEC+ countries adopted at the meeting on December 7, 2018, the alliance will reduce production in the first half of 2019 by 1.2 mln barrels.
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. "Crude-oil quality is another issue, and, in the wider context of supply in the early part of 2019, it is even more important".
In a sign of excess supply, OPEC's report said oil inventories in developed economies were above the five-year average in December. Distillate inventories decreased by 2.481 million barrels versus an expected draw of 1.090 million barrels.
US 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. But a shortfall of heavy-sour crude can cause complications for many refiners, such as those along the U.S. Gulf Coast, configured to process it. US shale producers have cut back on production, while crude imports in the USA over the past four weeks are down 7.5% from a year ago and tanker tracking data indicate a decline in Saudi crude shipments.
Despite the OPEC cuts and crisis in Venezuela, analysts said global oil markets remain well supplied.
Do they bid ever-increasing amounts for what heavy oil remains in the market, do they lower run rates, or do they try and switch to using more light crude?
"In terms of crude oil quantity, markets may be able to adjust after initial logistical dislocations (from Venezuela sanctions)", the Paris-based IEA said.
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