Global oil prices traded at the highest levels of the year Monday following a report that suggested a steep slump in OPEC production rates that followed a decline in U.S drilling installations last week and the start of sanctions on the sale of Venezuelan crude into the United States.
Reuters reported over the weekend that supply from OPEC members fell the most in two years last month, to 30.98 million barrels per day, as the cartel began its coordinated program of production cuts that are expected to take 1.2 million barrels from the market each day until at least early spring. That reported followed data from oil services group Baker Hughes Friday which showed the number of U.S drilling installations at the lowest level in eight months, and Friday's stronger-than-expected data from the Bureau of Labor Statistics which showed American employers created 304,000 new jobs last week.
"Oil is responding very differently to the jobs report it would seem, perhaps an indication of the bullish sentiment in the market," said Craig Erlam, a senior market analyst with Oanada brokerage in Singapore. "WTI and Brent surged in the aftermath of the jobs report and were further aided by the oil rig data, which showed a further 15 rigs going offline, continuing the trend since November. We're now seeing both testing major resistance around $55 and $65, respectively, a break of which could be very bullish."
Brent crude contracts for April delivery, the global benchmark, were marked 66 cents higher from their Thursday close in New York and changing hands at $63.41 per barrel while WTI contracts for March were seen 31 cents higher at $55.57 per barrel.
U.S. oil prices have risen nearly 7% since the U.S. State Department moved to sanction the sale of Venezuelan crude to the United States last week in an effort to pressure President Nicolas Maduro to cede power to rival Juan Guaidó, whom international observers deem the rightful winner of that country's disputed elections.
Treasury Secretary Steven Mnuchin said proceeds of the sale of crude by state-backed Petroleos de Venezuela, or PDVSA, and its better-known U.S subsidiary, Citgo Petroleum Corp., would need to be placed in 'blocked' accounts that could not be accessed by the Maduro government. National Security Adviser John Bolton said the move would cost "Maduro and his cronies" around $11 billion a year.
"If the people in Venezuela want to continue to sell us oil, as long as the money goes into blocked accounts we will continue to take it, otherwise will we not be buying it," Mnuchin told reporters Monday.
Venezuela's annual crude output has fallen to just 1 million barrels per day -- compared to the more than 11.9 million barrels that are pumped each day in the United States -- as the country's economic crisis prevents key investments to tap the world's biggest proven oil reserves. U.S. oil exports account for around 40% of its total foreign sales.
Energy Information Administration data shows the U.S. imported around 514 million barrels per day from Venezuela last year.