By Laila Kearney
NEW YORK (Reuters) - Oil prices rose more than 2 percent on Tuesday after the United States imposed sanctions on state-owned Venezuelan oil company PDVSA, a move likely to curb the OPEC member's crude exports and temper concerns about global oversupply that have weighed on crude futures.
International Brent crude oil futures were up $1.42 to $61.35 a barrel, or 2.4 percent, by 11:38 a.m. EST (1638 GMT). U.S. West Texas Intermediate (WTI) crude futures were up $1.37 to $53.36 a barrel, or 2.6 percent.
"The Venezuelan situation is obviously supportive," said Phil Flynn, an analyst at Price Futures Group in Chicago. "I don't think there's a fear in the market that it's going to be a devastating blow to the supply side, but it's just another piece to the supply puzzle that's going to be missing."
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..
While Washington's sanctions stop short of banning U.S. companies from buying oil from the Latin American country, 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, denounced the sanctions, saying they would likely limit Venezuela's ability to service its $3.15 billion sovereign debt to Moscow.
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.
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.
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. Caterpillar and Nvidia issued warnings on Monday about weakening demand from China.
(Additional reporting by Shadia Nasralla in London, Henning Gloystein in Singapore and Colin Packham in Sydney; Editing by David Goodman and David Gregorio)
This story has not been edited by Firstpost staff and is generated by auto-feed.
Updated Date: Jan 30, 2019 00:06:12 IST