Oil edged below $62 a barrel on Wednesday after a report showed a rise in U.S. crude inventories, countering expectations of a tightening market in 2019 due to OPEC-led supply cuts and U.S. sanctions on Venezuela.
U.S. crude inventories rose by 2.5 million barrels last week and gasoline stocks also increased, the American Petroleum Institute said. The government’s official supply report is due out later on Wednesday.
“The fact that U.S. crude oil and gasoline stocks rose more sharply than expected, as reported by the API after the close of trading yesterday, is weighing on prices,” said Carsten Fritsch, an analyst at Commerzbank.
Brent crude, the global benchmark, slipped 4 cents to $61.94 a barrel by 1331 GMT. U.S. West Texas Intermediate (WTI) crude was down 13 cents at $53.53.
Supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and allies since January have been supporting prices. The United States announced sanctions on Venezuela’s state oil company last week, a move which has yet to push prices up steeply but could still spark gains.
“The price has yet to react in any noticeable way,” Fritsch said of the sanctions. “That said, if the other OPEC countries fail to offset this outage, the oil market could quickly become undersupplied, driving the price up.”
The producers known as OPEC+ began cutting production by 1.2 million barrels per day from last month to avert a new supply glut and OPEC has delivered almost three-quarters of its pledged cutback already, according to a Reuters survey.
“The global oil supply/demand balance could shift from a current significant surplus to zero at the end of the year,” Jean-Pierre Durante, an analyst at Pictet Wealth Management, wrote in a report, if producers comply with the decision and extend it until December.
Venezuela, like other OPEC members Iran and Libya, was exempted from making voluntary curbs under the deal on expectations that its output faced involuntary downward pressure in 2019.
Worries about weaker global economic growth and the U.S.-China trade dispute have also weighed on the market. Oil prices fell on Tuesday after a survey showed euro zone business expansion nearly stalled in January.
U.S. President Donald Trump said in his State of the Union address that a trade deal was possible with China.
Senior U.S. and Chinese officials are poised to start another round of trade talks next week.
