Oil ticks higher, market eyes U.S. State of the Union address

Crude Oil

USA oil prices inched up on Tuesday, buoyed by expectations of tightening global supply due to US sanctions on Venezuela and production cuts led by OPEC.

Brent crude, the global benchmark for oil prices, was trading at $62.22 a barrel Tuesday afternoon, down 0.4 percent, while West Texas Intermediate (WTI) stood at $54.30, down 0.5 percent.

On average, however, analysts expected the EIA to report a rise of 3.7 million barrels in crude stockpiles for the week ended February 1, according to a survey conducted by S&P Global Platts.

The recent downswings in the crude oil market have been highly correlated with the release of the bearish economic data.

"While Venezuela's output reportedly rose last month, fresh United States 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.

Gasoline stocks increased by 513,000 barrels, less than anticipated, while distillate stockpiles fell a greater-than-expected 2.3 million barrels.

On Tuesday, The Wall Street Journal reported that OPEC officials said Saudi Arabia and its Persian Gulf allies were looking to create a formal partnership with a 10-nation group led by Russian Federation to manage the world's oil market.

Following a US decision to impose sanctions on Venezuela's oil industry last week, Guaido and the Trump administration have sought to appoint a new board of directors for Citgo.

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The producers known as OPEC+ started 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 last week.

Oil prices have been on the rise since the US Treasury announced the seizure of $7 billion in assets of Venezuela's state oil firm PDVSA and its US subsidiary Citgo last week.

Venezuela's opposition is opening a USA fund to receive the proceeds of oil sales, a key measure to secure revenue for its effort to dislodge President Nicolas Maduro, an opposition lawmaker said on Wednesday.

“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.

OPEC's share of the cut is 800,000 bpd, to be delivered by 11 members - all except Iran, Libya and Venezuela.

A stronger USA dollar limited gains on Wednesday.

"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. Oil prices fell on Tuesday after a survey showed euro zone business expansion almost stalled in January.

US President Donald Trump last week said he would meet his Chinese counterpart Xi Jinping in coming weeks to try to settle the two countries' dispute.

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