Oil falls below $62 on U.S. inventories, fading Venezuela concerns

US oil prices edge up as market eyes tighter supply

Pressuring prices are renewed concerns over rising USA crude inventories and record production levels.

Oil prices fell on Monday after disappointing USA factory data sparked fresh concerns about a slowdown in the global economy, but losses were limited as OPEC-led supply cuts and US sanctions against Venezuela pointed to tighter supply. Later in the year, it expects markets to remain fairly balanced due to a combination of waivers expiring for importers of Iranian oil, and because of a roll-over of the OPEC+ agreement into H2 2019.

Weighing on oil markets, US government data showed new orders for USA -made goods unexpectedly fell in November, with sharp declines in demand for machinery and electrical equipment. The surge comes shortly after Washington slapped sanctions on the Venezuelan state oil company PDVSA.

USA crude oil inventories climbed by 1.3 million barrels in the week that ended February 1, to 447.21 million barrels, data from the Energy Information Administration (EIA) showed on Wednesday.

Benchmark Brent crude had slipped 62 cents to $61.36 a barrel by 1000 GMT, after rallying about 15 percent in January. These factors have helped lift the price from a low of $42.95 in late December to its current level around $55.30 per barrel - not far from the 2-1/2 month high reached Monday.

"The fact that USA crude oil and gasoline stocks rose more sharply than expected, as reported by the API after the close of trading yesterday, is weighing on prices", said Carsten Fritsch, an analyst at Commerzbank.

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Russia has been in full compliance with its pledge to gradually cut its oil production, Russian Energy Minister Alexander Novak said in a statement on Monday, adding that production decreased by 47,000 barrels per day (bpd) in January from October.

“Looking ahead, the 2019 demand outlook for oil is not great, while the prospects of increased shale supply and competition elsewhere could keep the pressure on prices, ” he said.

Market participants are also watching for developments surrounding the U.S.

Worries about weaker global economic growth and the trade dispute between the United States and China have also weighed on the market.

“With higher production from non-OPEC producers, especially the US, over the last few years, OPEC's market share has been shrinking, ” said James Williams, energy economist at WTRG Economics. "China trade talks", said Gene McGillian, director of market research at Tradition Energy in Stamford, Connecticut. U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will lead a delegation to Beijing next week to lay the groundwork for a meeting between Presidents Donald Trump and Xi Jinping later this month.

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