Oil falls 1 percent as supply concerns fade

OPEC's oil exports to US fell to five-year low in January

US West Texas Intermediate (WTI) crude futures gained 43 cents, or 0.8 percent, to $54.09 a barrel after posting a session low of $52.86 a barrel. Front-month contract prices marked their lowest settlement Tuesday since January 29, according to FactSet data. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 889,000 barrels, API said. They also expect that gasoline and distillate inventories each posted gains of 1.7 million barrels.

Oil prices rose about 1 percent on Wednesday, boosted by signs of strong USA demand for distillate products and tightening global crude supply, but gains were capped by a rising United States dollar and ongoing concerns about a global economic slowdown, Trend reports citing Reuters.

Market participants have already been focused on signs of tightening global crude supply after the Organization of the Petroleum Exporting Countries (OPEC) and allies began an agreement in January to cut output.

"We expect the oil price to rise in the first-half of 2019 on tightening supply conditions and decline in the second-half on weakening economic activity and an increase in USA crude exports to global markets", said French bank BNP Paribas. OPEC, excluding Iran, Libya and Venezuela, agreed to handle 800,000 barrels a day of those cuts.

In contrast, a 2002-2003 strike against former President Hugo Chavez's government cut supplies and boosted prices to then outrageous levels above $30 a barrel, prompting Saudi Arabia to step in to avert a supply shortage.

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“The 2019 demand outlook for oil is not great, while the prospects of increased shale supply and competition elsewhere could drive prices further lower, ” he said.

Investors will be looking for clues in President Trump's State of the Union speech on a number of matters, but crude oil traders will be listening for positive comments about U.S. The political turmoil raises the risk of disruption to Venezuela's oil output.

"Basically it's a pretty supportive report", said Phil Flynn, oil analyst at Price Futures Group in Chicago. Short-term, speculative buying interest is being driven by the USA sanctions on Venezuela. Venezuela is an OPEC member and now holds the oil cartel's rotational presidency.

"The market reaction is quite subdued", a senior oil industry official said. March natural gas NGH19, +1.05% rose less than 0.1% to $2.662 per million British thermal units, following losses in each of the last four sessions .

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