Feds forced to raise oil price forecast amid Venezuela sanctions – By John Siciliano (Washington Examiner) / March 13 2019
Trump’s sanctions on Venezuela have managed to reduce the country’s oil production by 100,000 barrels a day from January to February, enough to drive up oil prices for 2019, the federal government forecast Wednesday.
The Energy Information Administration, which issued the forecast, is closely tracking the effects of the administration’s sanctions on oil prices, along with OPEC’s production cuts. Venezuela production dipped from 1.2 million barrels per day to 1.1 million barrels per day in the first month of sanctions.
EIA increased its 2019 crude oil forecast by nearly $2 per barrel to $63 per barrel.
Since Venezuela is an OPEC member, the EIA is tracking how the Venezuela losses from sanctions will factor into the international oil cartel’s decision to pull back overall production to balance the global oil market.
OPEC began implementing production cuts last month in order to counter a supply glut that depressed prices. The production cuts are meant to raise prices by depleting excess supply, which is working. The Brent oil price rose $5 to $64 per barrel from January to February.
EIA remains optimistic, however, that the price increases will be gradual because of the higher crude oil reserves that are present in many countries.
“Despite expectations of a tighter market compared with last month’s forecast, EIA still expects rising global liquid fuels inventories and OPEC spare capacity to limit upward price pressure,” the agency’s Week in Petroleum analysis said.
Nevertheless, EIA is tracking dramatic oil production cuts in Saudi Arabia of levels not seen for nearly two years. The production cut forced EIA to lower its previous OPEC production cut forecast.
Saudi Arabia said it will decide, along with other OPEC members and Russia, whether to continue the cuts for the remainder of the year based on how far the market balances in June. Based on these statements, the agency assumes that joint OPEC and Russia crude oil production cuts will remain in place through the end of 2019.
Meanwhile, U.S. gasoline prices continued their march upward from the previous week. The average price for regular gasoline rose nearly 5 cents in the last week to $2.47 per gallon on March 11, the agency reported.