Oil prices rally as U.S. sanctions on Venezuela ease supply worries

By Laila Kearney NEW YORK (Reuters) - Oil prices rallied above 2 percent on Tuesday after the United States put sanctions on state-owned Venezuelan oil company PDVSA, a move likely to curtail the OPEC member's crude exports and chip away at global oversupply worries.

Reuters January 30, 2019 01:05:19 IST
Oil prices rally as U.S. sanctions on Venezuela ease supply worries

Oil prices rally as US sanctions on Venezuela ease supply worries

By Laila Kearney

NEW YORK (Reuters) - Oil prices rallied above 2 percent on Tuesday after the United States put sanctions on state-owned Venezuelan oil company PDVSA, a move likely to curtail the OPEC member's crude exports and chip away at global oversupply worries.

International Brent crude oil futures were up $1.42 to $61.35 a barrel, or 2.4 percent, by 1:30 p.m. EST (1830 GMT). U.S. West Texas Intermediate (WTI) crude futures increased $1.32 to $53.31 a barrel, or 2.5 percent.

"The Venezuelan situation is obviously supportive," said Phil Flynn, an analyst at Price Futures Group in Chicago. "When you put the Venezuelan sanctions along with OPEC production cuts and more concerns about Libyan oil production...you see a market that is generally tightening."

Venezuela is among the world's largest heavy crude oil producers, and the United States has been its biggest client, taking about half the country's export volumes, followed by India and China..

The Trump administration's restrictions on Venezuelan crude, aimed at driving President Nicolas Maduro from power, stop short of banning U.S. companies from buying oil from the Latin American country. However, proceeds from such sales will be put in a "blocked account" that should deter PDVSA from shipping crude to the United States.

Venezuela's exports have already fallen to little more than 1 million barrels per day (bpd) in 2018 from 1.6 million bpd in 2017, according to Refinitiv ship-tracking data and trade sources.

Petromatrix estimated that Venezuelan exports will drop by about 500,000 barrels per day under current conditions.

Additionally, Venezuela is a member of the Organization of the Petroleum Exporting Countries, which is implementing a supply cut deal to support prices.

Russia, OPEC's biggest non-member ally, and China have both publicly denounced the sanctions.

Meanwhile, Libya's biggest oilfield, El Sharara, will remain shut until departure of an armed group occupying the site, the head of National Oil Corp said.

For graphic on Venezuela crude oil exports, click https://tmsnrt.rs/2Sfgis6

Despite some tightening, global oil supply remains high, largely because of a more than 2 million bpd increase in U.S. crude oil production last year to a record 11.9 million bpd.

"Market participants are also looking ahead to the petroleum inventories report from the U.S.," Abhishek Kumar, Senior Energy Analyst at Interfax Energy in London. The U.S. Energy Information Administration crude and gasoline inventory data will be released on Wednesday.

Some in the oil industry also worry that crude demand could stutter if the trade war between Washington and Beijing slows global economic growth.

In China, a top oil importer, signs of a slowdown have emerged. Activity in its vast manufacturing sector is expected to shrink for the second straight month in January, a Reuters poll showed.

(Additional reporting by Shadia Nasralla in London, Henning Gloystein in Singapore and Colin Packham in Sydney; Editing by David Gregorio and Alistair Bell)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters
World

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters
World

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.