Oil rises on OPEC cuts, U.S. sanctions on Iran and Venezuela

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UPDATE 1-Oil rises on OPEC cuts, U.S. sanctions on Iran and Venezuela

* OPEC cuts, U.S. sanctions tighten supply for heavy crude

* Economic concerns hold market in check

* Surge in U.S. supply caps prices (Adds Bank of America comment, updates prices)

By Henning Gloystein

SINGAPORE, Feb 12 (Reuters) - Oil prices rose on Tuesdayamid OPEC-led supply cuts and U.S. sanctions against Iran andVenezuela, although surging U.S. production and concerns overeconomic growth kept markets in check.

U.S. West Texas Intermediate (WTI) crude oil futures CLc1 were at $52.50 per barrel at 0102 GMT, up 9 cents, or 0.2percent, from their last close.

International Brent crude futures LCOc1 were up 18 cents,or 0.3 percent, at $61.69 per barrel.

Analysts warn that markets are tightening amid voluntaryproduction cuts led by the Organization of the PetroleumExporting Countries (OPEC) and because of U.S. sanctions onVenezuela and Iran. urn:newsml:reuters.com:*:nL3N20622M

But some said that supply-side risks were not receivingenough focus.

"We believe that oil is not pricing in supply-side riskslately as markets are currently focused on U.S.-China tradetalks, ignoring the risks currently in place from the loss ofVenezuelan barrels," U.S. bank J.P. Morgan said in a weeklynote.

Should U.S.-China talks to end trade disputes between thetwo nations have a positive outcome, the bank said oil marketswould "switch attention from macro concerns impacting futuredemand growth to physical tightness and geopolitical risksimpacting immediate supply".

With OPEC engaged in supply management and the Middle Eastentangled in political conflicts while production outside thegroup surges, Bank of America Merrill Lynch said OPEC's globalmarket share would fall as its outright output drops to 29million barrels per day (bpd) in 2024 from 31.9 million bpd in2018.

Growing U.S. supply and a potential economic slowdown thisyear could cap oil markets.

"The worries of oversupply stemming from the U.S. willlikely remain a dominant theme as we approach the warmermonths," said Edward Moya, market analyst at futures brokerageOANDA.

U.S. bank Morgan Stanley said the surge in U.S. crude oilproduction, which tends to be light in quality and which rose bymore than 2 million barrels per day (bpd) last year to a record11.9 million bpd C-OUT-T-EIA , had resulted in overproductionof gasoline.

"Light crudes naturally yield more gasoline, and togetherwith relatively modest demand-growth, this has driven gasolinestocks sharply higher and crack spreads sharply lower in recentmonths," Morgan Stanley said.

Refining profits for gasoline have plunged since mid-2018,going negative in Asia and Europe, amid tepid demand growth anda surge in supply. urn:newsml:reuters.com:*:nL8N1ZP5U0

As a result, Morgan Stanley said "low refining margins andweaker economic data means oil prices can rally only so much(and) we continue to see modest upside for Brent to $65 perbarrel in the second-half (of 2019)".

Bank of America also warned of "a significant slowing ingrowth globally", adding that it expected Brent and WTI toaverage $70 per barrel and $59 per barrel respectively in 2019,and $65 per barrel and $60 per barrel in 2020.

GRAPHIC: U.S. oil production & drilling levels   https://tmsnrt.rs/2Tm4u4I
(Reporting by Henning Gloystein; Editing by Joseph Radford) ((henning.gloystein@thomsonreuters.com +65 6870 3263))

This article appears in: Stocks , World Markets , Oil

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