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Oil steadies as investors weigh up odds of global supply squeeze

Reuters  |  LONDON 

By Cooper

LONDON (Reuters) - Oil steadied on Thursday as growing expectations that global supply could fall significantly short of demand this year lent support, offsetting the negative impact of a rise in U.S. inventories.

Brent futures were last down 12 cents at $62.57 a barrel by 1022 GMT, while U.S. crude futures were down 7 cents at $53.94 a barrel.

The came under pressure earlier in the day following weekly data from the on Wednesday that showed an unwelcome increase in stocks of

Still, some analysts were relieved that U.S. crude only rose by 1.3 million barrels in the week to Feb. 1, according to the EIA, compared with expectations for an increase of 2.2 million barrels.

pointed out that the rise in crude inventory masked a bullish decline in stocks of refined products.

"The weekly report from the EIA on U.S. was bullish for outright prices, plain and simple. The large draws in distillate ... made sure that commercial fell for the second week, this time by 3.4 million barrels," he said.

"Additionally, the builds in crude (+1.3 million bbls) and gasoline stocks (+0.5 million bbls) were less than anticipated."

U.S. distillate stocks fell by 2.3 million barrels, while inventories of other refined fuels dropped by 2.9 million barrels.

The is still showing a 20 percent gain so far this year, but has struggled to return to the near-four year highs of late 2018, given the concern that a slowing global economy could eat into fuel demand, with German industrial output unexpectedly falling in December for the fourth consecutive month.

Yet some investors believe these concerns may be overblown, in light of the decline in OPEC production and a squeeze on supply from and from U.S. sanctions.

"We believe that financial markets may be overestimating the risks of a global recession. Moreover, - prices were between 14 percent and 18 percent lower in January than their 2018 average - are likely to stimulate economic activity and oil demand, particularly in emerging markets," said Jean-Pierre Durante, of Applied Research at Pictet Wealth Management.

Providing global markets with price support are supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) aimed at tightening the market.

Meanwhile, U.S. sanctions against Venezuela's are expected to freeze sales proceeds of Venezuelan crude exports to the

"Around a third of Venezuela's exports to the U.S. As such, we expect Venezuelan exports to quickly fall by 300,000 barrels per day (bpd) to around 700,000 bpd," said on Thursday.

(Additional reporting by in Singapore; Editing by Susan Fenton)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, February 07 2019. 16:08 IST
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