Oil Settles Higher as US Pressures Venezuela
by Bloomberg
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas
Oil crept higher as the capture of Venezuelan President Nicolas Maduro by US forces opened new currents of geopolitical risk and as Washington appears set to continue clamping down on shipments from the South American nation.
West Texas Intermediate added 1.7% to settle above $58 a barrel. The US plans to continue pressuring the OPEC producer’s oil exports, though Venezuela’s relatively small global footprint and a market already grappling with a swelling glut are capping price gains. Oil company shares jumped in premarket trading after President Donald Trump said American companies will spend billions of dollars to rebuild Venezuela’s crumbling infrastructure.
“The market has got this right,” Bob McNally, president of Rapidan Energy Group, said in a Bloomberg TV interview. “It’s a nothingburger for short-term crude futures, it’s another tailwind for US oil companies and majors.”
While the future of Venezuela and its oil sector is still very murky, US President Donald Trump has said the US would be running the country temporarily and needed “total access” to Venezuela’s oil supply. CBS reported on Monday that the US plans to interdict the Marinera, formerly known as Bella 1, a tanker allegedly carrying Venezuelan oil. Maduro, meantime, was flown to New York and pleaded not guilty Monday to narco-terrorism charges.
Venezuela was once an oil-producing powerhouse, but the country’s output has tumbled over the past two decades and now represents less than 1% of global supplies, which is mostly exported to China. The global market is facing a big surplus this year as OPEC+ and others add more barrels against a backdrop of subdued demand growth.
“The events have turned up the heat on geopolitical risk,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth Group. “Crude is reacting less to potential short-term supply loss from Venezuela and more to potential knock-on effects that may come from Russia, China and Iran in response to US actions.”
On Sunday, OPEC+ stuck with plans to pause supply hikes in the first quarter. The group, led by Saudi Arabia and Russia, didn’t discuss Venezuela during the 10-minute video conference, according to delegates, who added that it’s premature to gauge how to respond to the unfolding situation.
Venezuelan oil exports fell to a 17-month low in December amid a US naval blockade. Those restrictions remain in place, leaving ships holding 7.33 million barrels unable to depart for their final destination in China.
Despite the US attacks on Saturday, Venezuela’s oil infrastructure, including Jose port, Amuay refinery and main producing areas in the Orinoco Belt, wasn’t affected, according to people familiar with the matter. Still, recent American pressure on Maduro’s regime, including the seizure of tankers, has forced the country to start shutting some oil wells.
“Any short-term disruption to Venezuelan output can easily be offset by increased production elsewhere,” Neil Shearing, group chief economist for Capital Economics Ltd., said in a note. “We expect global supply growth over the next year or so to push oil prices down towards $50.”
Elsewhere, the Israeli military struck Hamas and Hezbollah targets in Lebanon. The move may test a web of fragile peace deals between Jerusalem and its regional adversaries.
Oil Prices
- WTI for February climbed 1.7% to settle at $58.32 a barrel in New York.
- Brent for March rose 1.7% to settle at $61.76 a barrel.
by Bloomberg
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas