Oil falls on U.S

OPEC supply fell in January by the largest amount in two years

OPEC supply fell in January by the largest amount in two years

Oil fell below $62 a barrel on Wednesday after a report showed a rise in USA crude inventories, countering expectations of a tightening market in 2019 because of OPEC-led supply cuts and us sanctions on Venezuela.

U.S. West Texas Intermediate (WTI) crude futures fell 70 cents, or 1.27 percent, to settle at $54.56 a barrel.

USA government data on Wednesday showed that domestic crude inventories rose less than expected last week even as refineries hiked output.

However, Russian oil output in January missed the target for the output cuts, Energy Ministry data showed on Saturday.

"While Venezuela's output reportedly rose last month, fresh USA sanctions on the country could see 0.5 to 1 percent of global supply curtailed", said Vivek Dhar, commodities analyst for Commonwealth Bank of Australia in a note on Monday.

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. "Because the number was a little disappointing, it played into the slowing demand scenario", said Phil Flynn, oil analyst at Price Futures Group in Chicago.

The Trump administration unveiled sanctions on Venezuela's state-owned oil firm Petróleos de Venezuela SA late last month in an effort to cut off money to embattled President Nicolás Maduro, days after opposition leader Juan Guaidó declared himself interim president of the country and gained much worldwide support.

With fresh sanctions potentially looming, a flotilla loaded with about 7 million barrels of Venezuelan oil has formed in the Gulf of Mexico, some holding cargoes bought ahead of the latest USA sanctions and others whose buyers are weighing who to pay, according to traders, shippers and Refinitiv Eikon data.

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Analysts said USA sanctions on Venezuela had focused market attention on tighter global supplies.

"Distillate demand increased sharply last week due to the extreme cold weather, which contributed to the declining distillate stocks", Commerzbank analyst Carsten Fritsch said.

"Despite several forays in WTI above our prior resistance of $55, the market continues to draft back down largely under the pressure of this week's stronger dollar", Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

Still, some observers have pointed out that the weakened state of its oil industry may have only a limited effect on the wider global crude market.

The global economic outlook and prospects for growth in fuel demand have also been clouded by poor economic data in China and U.S. Oil fell on Tuesday after a survey showed euro zone business expansion almost stalled in January.

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

Senior US and Chinese officials are poised to start another round of trade talks next week.

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