U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Friday and for the week for a number of reasons, mostly affecting the supply side. The markets are being supported primarily by deeper-than-expected OPEC-led production cuts and the impact of U.S.-led sanctions on Venezuelan oil exports. Despite these moves, on a macro level, the global oil market remains well-supplied. Additionally, gains are being limited by weakening global demand.
Production Cuts Supportive
On the supply side, Saudi Arabia, the defacto leader of OPEC, said it cut daily production and exports by a further 500,000 barrels per day (bpd) on top of its agreed OPEC quota reduction. Since January 1, an OPEC-led group has been cutting at least 1.2 million barrels per day from production in an effort to trim the global supply and stabilize prices. On Tuesday, the Saudis said it had cut its output by almost 800,000 bpd in January to 30.81 million bpd.
The markets received a boost late in the week after Saudi Arabia said it would cut even more in March than it originally pledged. Russia said that it has cut its oil production by 80,000-90,000 barrels per day from its level in October, Moscow’s reference level for its cuts, the country’s energy minister said.
In the meantime, the political rift between Venezuela and the United States continues with the U.S. sanctions against the South American nation giving prices a slight boost.