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, and after an industry group reported a surprise decline in US oil inventories.
According to the agreement clinched in December, Saudi Arabia alone has reportedly reduced production of crude by almost 400,000 barrels per day to 10.24 million barrels.
Additionally, the International Energy Agency said energy market participants may be able to adjust to US sanctions against Venezuela's crude industry. The Organization of Petroleum Exporting Countries is cutting output to prevent a worldwide surplus, while member nation Iran is being hit by American sanctions.
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". OPEC's share of that cut is 800,000 bpd.
United States crude output is expected to grow by 1.45 million bpd this year and by another 790,000 bpd next year to hit 13 million bpd in 2020, according to the Energy Information Administration.
Prices of the American reference for the sweet light crude oil are prolonging the recovery on Wednesday, trading at shouting distance from the $54.00 mark per barrel ahead of the EIA report.
Venezuela's diminished importance in the global oil market and as a supplier to the United States has emboldened the US administration to take a tough approach in attempting to oust the government of Nicolas Maduro.
Venezuela has tried to find alternative customers, especially in Asia, but under USA pressure many buyers there are also shying away from dealing with PDVSA.More news: Allegiant Airlines announces flights from Wichita to Destin, Florida
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OPEC forecast global oil demand would grow by 1.24 million bpd, down 50,000 bpd from last month and weaker than 1.47 million in 2018.
"Some recent positive developments could support the global economy at its current level, including the recovery in oil prices, possible progress in U.S".
But while Venezuela's crude now accounts for a very limited share of the global oil market, it plays a much more important role in the niche market for heavy crude.
"Even so, headline benchmark crude oil prices have hardly changed on news of the sanctions".
Middle distillates are used mostly in freight transportation as well as manufacturing, mining and farming, and are particularly valuable late in the business cycle when economic activity is near to the peak.
Bank of America also warned of a "significant slowing" in global growth, adding that it expects Brent and WTI to average $70 and $59 a barrel respectively in 2019 and $65 and $60 in 2020.
The sudden embargo on Venezuela's exports has therefore sent refiners in the United States and elsewhere scrambling to find alternative supplies compatible with their equipment.