Oil drops as global economic concerns grip market

Oil Holds Gains on Signs of Shale Slowdown as OPEC Output FallsMore

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.

Crude futures fell earlier after an industry report suggested a larger rise in crude inventories, while concerns about the impact on global supplies of US sanctions on Venezuela faded. The government's official supply report is due out later on Wednesday.

The Energy Information Administration (EIA) wind of the Department of Energy (DoE) released an increase of 1.3 million barrels into the crude stocks than market consensus of 2.18 million barrels.

US West Texas Intermediate (WTI) crude futures were at $53.82 per barrel at 0607 GMT, down 19 cents, or 0.4 per cent, from their last settlement.

Earlier, oil price came under pressure following weekly data showing rise in USA stocks.

According to EIA, U.S. crude oil refinery inputs averaged 16.6 million barrels per day last week, which was 170,000 barrels more than the previous week's average.

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"The price has yet to react in any noticeable way", Fritsch said of the sanctions. 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.

A decline in OPEC production and a squeeze on supply from Iran and Venezuela from US sanctions have led many analysts to forecast that the market will be balanced in 2019.

"Supply fundamentals have increasingly been turning supportive in recent weeks, but against this the market still worries about the yet-to-be-realized - if at all - impact on demand from weaker macroeconomic fundamentals", said Ole Hansen, head of commodity strategy at Saxo Bank. US crude was down 48 cents at $53.18.

Expectations of reduced supplies following a December accord by OPEC, and non-OPEC nations like Russian Federation, to reduce output by 1.2 million barrels per day is expected to contribute to support the market.

US inventories of winter fuels, including propane, shrank by about 4.9 million barrels combined last week, EIA data showed Wednesday. Oil fell on Tuesday after a survey showed euro zone business expansion almost stalled in January. The kingdom pumped 10.643 million bpd in December. USA crude output stayed at a record-high 11.9 million barrels a day.

With a nervous market, traders are focused on the U.S. State of the Union address by President Donald Trump.

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