LONDON: Oil prices fell on Tuesday, a day after data showing a decline in US factory orders dragged both benchmarks down from 2019 highs.
Despite the slide, investors expect US sanctions on Venezuela and production cuts led by OPEC to head off a glut this year, buoying prices.
US crude futures were down 17 cents, or 0.31 percent, at $54.39 per barrel by 1215 GMT. They touched their highest in more than two months at $55.75 the previous day.
Brent crude futures were down 24 cents, or 0.38 percent, at $62.27 a barrel, off a high of $63.63.
Trading proceeded at lower volumes in parts of East Asia due to the Lunar New Year holiday.
"Disappointing US factory data sparked fresh concerns over a slowdown in the global economy, although losses were limited as OPEC cuts and US sanctions on Venezuela continued to point to a tighter supply picture," Cantor Fitzgerald Europe said.
The Organization of the Petroleum Exporting Countries and its allies, including Russia, agreed to production cuts effective from last month to forestall an overhang.
The oil industry generally believes the curbs will help balance the market in 2019.
"You'll see OPEC disciplined and therefore prices look fairly robust around where they are", BP CFO Brian Gilvary told Reuters, adding that he expected demand growth of 1.3 to 1.4 million barrels per day in 2019 -- similar to 2018.
Analysts said US sanctions on Venezuela had focused market attention on tighter global supplies.
"Fresh US sanctions on the country could see 0.5-1 percent of global supply curtailed," said Vivek Dhar, mining and energy analyst at Commonwealth Bank of Australia.
The sanctions will sharply limit oil transactions between Venezuela and other countries and are similar to, but slightly less extensive than, those imposed on Iran last year, experts said on Friday, after looking at details posted by the Treasury Department.
Meanwhile, a Reuters survey found that supply from OPEC states had fallen the most in two years, as Saudi Arabia and its Gulf Arab allies over-delivered on pledged cuts, while Iran, Libya and Venezuela registered involuntary declines.
But weighing on markets, US government data showed new orders for US-made goods unexpectedly fell in November, with sharp declines in demand for machinery and electrical equipment.
The global economic outlook and prospects for growth in fuel demand have been clouded by poor economic data in China and US-China trade tensions.
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