OPEC Report Shows Iran's Oil Production And Exports Down In January

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Most of that reduction has been thanks to Saudi Arabia.

The EIA has estimated that United States production will average 12.1million bpd, which would mark a new record.

Meanwhile, Barclays bank added, "Oil production is rapidly falling and companies that normally resell Venezuelan crude have not found ways to mitigate the effect of the USA sanctions".

While the region, which accounts for about half of the world's refining capacity, is still able to source oil, it's becoming harder to get hold of the grades of crude that many Asian refiners prefer.

Given the six- to eight-week sailing time between the Latin American country and destinations in Asia, it's likely that the pinch of US sanctions will only be felt in April, given that all February cargoes and most of March's are already en route.

Looking forward, oil could continue to rise, courtesy of falling OPEC and Venezuelan supplies.

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.

Previous pacts by OPEC and its partners including Russian Federation, often called OPEC+, to cut back production have been marked by initial low compliance rates by certain countries.

"The Schork Report" Publisher Stephen Schork on the outlook for oil prices.

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OPEC production fell to a four-year low in January as the cartel applied a new pact to boost global oil prices, the International Energy Agency said Wednesday, but Russian Federation and other ex-Soviet states failed to cut back output as much as promised.

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. "But the news about Saudi Arabia is pretty significant, so the market is reacting to that more so than anything else right now".

IEA figures show Venezuala's output dropping by roughly 30,000 barrels per day to 1.26 mbd.

Total global oil demand is now estimated to average 98.76 mb/d in 2018.

Basra Heavy, as assessed by Argus Media, was at $60.17 a barrel on Tuesday, while Bonny Light was at $64.38.

Mid-distillates are especially prized at the moment with the forthcoming introduction of new bunker fuel regulations by the International Maritime Organization from the start of 2020.

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

While global markets remain comfortably supplied, disruption in Venezuela poses a threat because production of the heavier, higher-sulfur crude it pumps is being reduced elsewhere, the IEA said in a monthly report.

John Kemp is a Reuters market analyst.

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