Oil prices fell on Monday after disappointing USA factory data sparked fresh concerns about a slowdown in the global economy, but losses were limited as OPEC-led supply cuts and us sanctions against Venezuela pointed to tighter supply. 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.
Weighing on oil markets, USA government data showed new orders for US -made goods unexpectedly fell in November, with sharp declines in demand for machinery and electrical equipment. The West Texas Intermediate (WTI) for March delivery erased 0.90 USA dollar to settle at 53.66 dollars a barrel on the New York Mercantile Exchange.
At 447.2 million barrels, the EIA said, us crude oil inventories are still above the seasonal average but not by much.
Investors are also expecting that disruption to supplies from Venezuela will not be large in the long run.
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Global benchmark Brent crude dropped almost 1% to $61.39 a barrel while WTI futures were down more than 1% at $53.12 a barrel.
While OPEC and allied producers are slashing their output in an attempt to boost crude prices, which saw a rapid fall a year ago, the USA has been opposing the measure and vowed to continue expanding its supply.
"The collapse in oil prices late previous year has resulted in more cautious spending by USA oil explorers", said Dhar. Bullish traders are banking on the Venezuelan oil sanctions and the OPEC-led production cuts to provide support.
If sanctions compel US oil companies to wind down their business in the Latin American nation, production could sink to 600,000 barrels a day, according to Rapidan Energy Group.
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Venezuela's opposition is opening a US fund to receive the proceeds of oil sales, a key measure to secure revenue for its effort to dislodge President Nicolas Maduro, an opposition lawmaker said on Wednesday. US crude was down 48 cents at $53.18.
OPEC's share of the cut is 800,000 bpd, to be delivered by 11 members - all except Iran, Libya and Venezuela.
"Despite several forays in WTI above our prior resistance of $55, the market continues to draft back down largely under the pressure of this week's stronger dollar", Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
Concern about weaker global economic growth and the trade dispute between the United States and China have also weighed on sentiment. US Treasury Secretary Steven Mnuchin told reporters that by blocking PDVSA's assets, the United States was preserving the assets of the company in the interests of the people of Venezuela and also protecting its own market.
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Senior US and Chinese officials are poised to start another round of trade talks next week.