LONDON: Oil prices rose on Tuesday as investors expect US sanctions on Venezuela and production cuts, led by OPEC and its allies, to head off any glut, but data showing a decline in US factory orders weighed on the market.
The supply optimism helped US West Texas Intermediate (WTI) and Brent crude reach 2019 highs on Monday.
WTI futures were up $0.46, or 0.84%, at $55.02 per barrel by 0940 GMT. They touched their highest level in more than two months at $55.75 the previous day.
International Brent crude futures were up $0.33, or 0.53%, at $62.84 a barrel, down from a high of $63.63.
Trading proceeded at lower volumes in parts of East Asia due to the Lunar New Year holiday.
The Organisation of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, agreed to production cuts effective January 2019 to forestall an overhang.
The oil industry generally believes the curbs will help balance the market this year.
“You’ll see OPEC disciplined and therefore prices look fairly robust around where they are,” BP CFO Brian Gilvary told Reuters, adding that he expected demand growth of 1.3-1.4 million bpd in 2019 – similar to 2018.
Analysts said US sanctions on Venezuela had focused market attention on tighter global supplies. “Fresh US sanctions on the country could see 0.5-1% of global supply curtailed,” said Vivek Dhar, mining and energy analyst at Commonwealth Bank of Australia.
The sanctions will sharply limit oil transactions between Venezuela and other countries and are similar to, but slightly less extensive than, those imposed on Iran last year, experts said on Friday, after looking at details posted by the Treasury Department.
Meanwhile, a Reuters survey found that supply from OPEC states had fallen the most in two years as Saudi Arabia and its Gulf Arab allies over-delivered on pledged cuts, while Iran, Libya and Venezuela registered involuntary declines.
But weighing on markets, US government data showed new orders for US-made goods unexpectedly fell in November, with sharp declines in demand for machinery and electrical equipment.
The global economic outlook and prospects for growth in fuel demand have been clouded by poor economic data in China and US-China trade tensions.
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.