Oil falls 1 percent as supply concerns fade

OPEC supply fell in January by the largest amount in two years

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

Venezuela, which produced 1.15 million barrels per day in December, was forced to look for alternative clients for its crude oil following sanctions that prevent the state oil company PDVSA from exporting to the US unless the revenues are paid to opposition leader Juan Guaido.

Brent crude oil futures were last down 50 cents, or 0.8, at $62.19 a barrel by 1310 GMT.

Oil fell 1 percent on Wednesday after a report showed a rise in US crude inventories, while concerns about the impact of USA sanctions on Venezuela on global supplies eased. "China deal not working out, or more anti-trade rhetoric would be a negative for energy prices as demand would be lower if global growth keeps being downgraded", said Alfonso Esparza senior market analyst, OANDA.

From a fundamental perspective, the price is benefiting from data suggesting that supplies from the Organization of the Petroleum Exporting Countries fell by the most in two years last month, with Saudi Arabia leading the way.

The producers, known as OPEC+, began cutting production from last month to avert a new supply glut and OPEC has delivered nearly three-quarters of its pledged cutback already.

Meanwhile, U.S. sanctions against Venezuela's oil industry are expected to freeze sales proceeds of Venezuelan crude exports to the United States.

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Moreover, Venezuela is struggling to export oil because of USA sanctions in support of "interim president" Juan Guaidó, who is challenging the incumbent Hugo Chávez.

Yet some investors believe these concerns may be overblown, in light of the decline in OPEC production and a squeeze on supply from Iran and Venezuela from U.S. sanctions.

Market participants are also watching for developments surrounding the U.S. A stronger dollar makes greenback-denominated commodities more expensive for holders of other currencies.

WTI crude benchmark struggles around $54.00 on early Thursday as investors moved back to supply glut concerns.

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

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

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