Published: Thu, February 07, 2019
Money | By Ralph Mccoy

Oil prices drops below $61.5

Oil prices drops below $61.5

Despite the slide, investors expect USA sanctions on Venezuela and production cuts led by OPEC to head off a glut this year, buoying prices.

Brent crude futures rose 62 cents, or 1 percent, to $62.60 a barrel by 11:33 a.m. EST (1633 GMT).

The producers known as OPEC+ began cutting production by 1.2 million barrels per day (bpd) from last month to avert a new supply glut and OPEC has delivered nearly three quarters of its pledged cuts already, a Reuters survey showed.

Weighing on oil markets, USA government data showed new orders for US -made goods unexpectedly fell in November, with sharp declines in demand for machinery and electrical equipment. All in all, many analysts expect the heightened oil price volatility we have been witnessing for a few months now to remain throughout 2019.

Institutions also increased their holdings of Brent crude at the end of January with the latest ICE Futures data showing holdings increasing by 30 million barrels to 233 million barrels, according to Reuters. On the flip side, the next up barrier aligns at $53.53 (10-day SMA) seconded by $55.59 (2019 high Feb.4) and finally $58.00 (high Nov.18 2018).

Meanwhile, oil supply from the Organization of the Petroleum Exporting Countries fell in January by the largest amount in two years, a Reuters survey found, as Saudi Arabia and its Gulf allies over-delivered on the group's supply-cutting pact while Iran, Libya and Venezuela registered involuntary declines.

OPEC oil supply fell in January by the largest amount in two years despite sluggish production declines from Russian Federation, according to a Reuters survey.

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The Trump administration has imposed sweeping sanctions on Venezuelan state-owned oil firm PDVSA, aimed at severely curbing the OPEC member's crude exports to the United States and at pressuring socialist President Nicolas Maduro to step down.

The sanctions will sharply limit oil transactions between Venezuela and other countries and are similar to those imposed on Iran past year, experts said after examining details posted by the Treasury Department. The surge comes shortly after Washington slapped sanctions on the Venezuelan state oil company PDVSA.

USA energy firms last week cut the number of oil rigs operating to their lowest in eight months as some drillers followed through on plans to spend less on new wells this year.

Citgo, the eighth-largest US refiner and Venezuela's top foreign asset, is in the middle of a tug of war as the Trump administration has made aggressive moves to remove it from Maduro's control.

The global economic outlook and prospects for growth in fuel demand have also been clouded by poor economic data in China and U.S.

"The market seems to be turning on renewed worries that there doesn't seem to be a lot of progress on the U.S". These concerns, in combination with uncertainty in the US-China trade negotiations keep weighing on traders' sentiment.

With a nervous market, traders are focused on the US State of the Union address by President Donald Trump.

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