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Oil Prices Climb as US Threatens Sanctions Against Venezuela

Amid violent street protests, Venezuela's opposition leader Juan Guaido declared himself interim president this week, winning recognition from Washington and parts of Latin America.

Reuters

Updated:January 25, 2019, 4:05 PM IST
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Oil Prices Climb as US Threatens Sanctions Against Venezuela
Image for representation. (Photo: Reuters)
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London: Oil prices edged up on Friday as turmoil in Venezuela increased the chances of tighter global supply if the United States makes good on signals that it could impose sanctions on Venezuelan exports.

But fresh data on surging U.S. fuel stocks and worries about U.S.-China trade talks weighed on prices.

Brent crude oil futures were at $61.17 a barrel at 0955 GMT, up 8 cents, or 0.13 percent. Earlier on Friday, the international benchmark crude rose as high as $61.92.

Brent, however, has shed about 2.4 percent since the start of trade on Monday and is on track to post its first week of losses in four weeks.

U.S. West Texas Intermediate (WTI) crude futures were at $53.34 per barrel, up 21 cents, or 0.4 percent.

Amid violent street protests, Venezuela's opposition leader Juan Guaido declared himself interim president this week, winning recognition from Washington and parts of Latin America.

Nicolas Maduro, the country's leader since 2013, responded by breaking relations with the United States.

"The oil market is partially pricing in the risk to Venezuela's crude production, which has been plummeting in recent years," Vandana Hari of Vanda Insights said.

RBC Europe predicted that sanctions could nearly double projected output shortfalls from the troubled exporter.

"Venezuelan production will decline by an additional 300,000-500,000 barrels per day (bpd) this year but such punitive measures could expand that outage by several hundred thousand barrels."

Global oil markets are still well supplied, however, thanks in part to surging output in the United States.

Record U.S. production would likely offset any short-term disruptions to Venezuelan supply due to possible U.S. sanctions, Britain's Barclays said in a note. The bank cut its 2019 average Brent forecast to $70 a barrel, from $72 previously.

The output surge has swollen U.S. fuel stocks, and crude inventories rose by 8 million barrels last week, according to official data released on Thursday.

But demand may start to stutter because of a global economic slowdown, which is likely to dent fuel consumption.

A trade dispute between the United States and China and tightening financial conditions around the world have hurt manufacturing activity in most economies and dragged China's growth last year to the weakest in nearly 30 years.

According to Reuters polls of hundreds of economists worldwide, a synchronised global economic slowdown is underway and would deepen if the U.S.-China trade war escalated.
| Edited by: Ahona Sengupta
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