Oil price surges amid OPEC cuts & US sanctions against Venezuela

Crude oil prices hit a 2019 high on Monday. The surge comes shortly after Washington slapped sanctions on the Venezuelan state oil company PDVSA.

Futures on US and global benchmarks, West Texas Intermediate (WTI) and Brent crude, rose to the highest level since late November 2018. Brent was up more than one percent and trading at $64.40 a barrel as of 10:49am GMT. Meanwhile US WTI crude rose to $55.53.

READ MORE: US announces sanctions against Venezuela's state oil company PDVSA

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. The US sanctions against the Latin American country will also affect $11 billion worth of exports as Washington is waging a campaign to support Juan Guaido, who recently declared himself Venezuela’s new leader.

Another factor behind the oil market rally is the supply cuts imposed by the member-states of the Organization of the Petroleum Exporting Countries (OPEC) and allied oil producers. The cartel and the world’s biggest exporter, Saudi Arabia, slashed its output more than expected under the OPEC deal, to 10.2 million barrels a day in January and is aiming to pump around 100,000 barrels less in February.

“You have the sanctions on Venezuela, on top of the reduced supply from Saudi Arabia,” Olivier Jakob, oil analyst at Petromatrix, said as cited by Reuters. “There’s no sign of overhang in the crude oil markets.”

While OPEC and allied producers are slashing their output in an attempt to boost crude prices, which saw a rapid fall last year, the US has been opposing the measure and vowed to continue expanding its supply.

A report published by the US Energy Information Administration (EIA) last week showed that the country’s oil production averaged a record 11.9 million barrels a day in November, up 345,000 from October and up nearly 1.8 million compared with November 2017’s average figures.

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