Economy

United States oil prices edge up as market eyes tighter supply

United States oil prices edge up as market eyes tighter supply

Oil prices rose on Tuesday as investors expect United States sanctions on Venezuela and production cuts, led by OPEC and its allies, to head off any glut, but data showing a decline in U.S. factory orders weighed on the market. The cartel and the world's biggest exporter, Saudi Arabia, slashed its output more than expected under the OPEC deal, to 10.2 million barrels a day in January and is aiming to pump around 100,000 barrels less in February.

USA sanctions on Venezuela's state oil company could also lift prices, though they have yet to trigger any sharp increase.

US crude futures were down 50 cents, or 0.9 percent, at $54.06 a barrel by 1400 GMT.

US crude inventories rose by 2.5 million barrels last week, the American Petroleum Institute said on Tuesday.

Longer-term investors believe the OPEC-led production cuts could eventually trim the global supply glut while stabilizing prices.

International Brent crude oil futures on Monday were down 20 cents, or 0.32 percent at 0339 GMT to $62.54 a barrel, after closing up 3.14 percent in the previous session to their highest close since November 21. The sanctions aim to block USA refiners from paying into PDVSA accounts controlled by Venezuelan President Nicolas Maduro.

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U.S. government data on Wednesday showed that domestic crude inventories rose by less than expected last week even as refineries hiked output.

In 2018, India had imported 16.5 mln tn of crude oil from the South American country, accounting for around 8% of the total crude oil imports. "Because the number was a little disappointing, it played into the slowing demand scenario", said Phil Flynn, oil analyst at Price Futures Group in Chicago.

"Fresh U.S. sanctions on the country could see 0.5-1 percent of global supply curtailed", said Vivek Dhar, mining and energy analyst, Commonwealth Bank of Australia.

"Despite several forays in WTI above our prior resistance of $55, the market continues to draft back down largely under the pressure of this week's stronger dollar", Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

The global economic outlook and prospects for growth in fuel demand have also been clouded by poor economic data in China and U.S. US Treasury Secretary Steven Mnuchin told reporters that by blocking PDVSA's assets, the United States was preserving the assets of the company in the interests of the people of Venezuela and also protecting its own market.

US President Donald Trump last week said he would meet with Chinese President Xi Jinping, perhaps twice, in the coming weeks to try to seal a comprehensive trade deal with Beijing, but acknowledged it was not yet clear whether a deal could be reached.