Published: Mon, January 28, 2019
Business | By Pearl Harrison

Oil edges down as United States supplies, economic worries eclipse Venezuela turmoil

Oil edges down as United States supplies, economic worries eclipse Venezuela turmoil

Meanwhile, markets digest the latest reports of potential United States sanctions on Venezuela's crude oil exports, which could make the oil markets tighter, with the OPEC output cuts already underway.

Oil prices fell 1 percent on Wednesday, weighed down by swelling USA inventories and a plunge in global stock markets amid concerns over an economic slowdown.

The oil executive also underscored "difficult access to water, and electricity" in Venezuela. East Coast refineries have not imported Venezuelan crude since 2017, according the S&P report.

Maduro responded by breaking relations with the United States.

The ongoing OPEC+ agreement to curb oil output remains the nearly exclusive source of support for prices.

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.

Declining Venezuelan shipments have been underpinning demand for heavy Canadian crude for more than a year, even at the South American nation's own US refineries.

Of apparent less concern to traders was news from Baker Hughes that USA drillers added 10 oil rigs in the week to January 25, bringing the total count to 862 - the first increase in the number of operating rigs this year - however, like the Venezuela issue, this news may have a delayed reaction that could play out in coming days.

“As we shuffle into seasonal maintenance, it is no surprise to see refinery runs dropping, but this drop has been compounded by a big jump in imports to propel crude stocks higher, ” he said.

Losing access to USA diluents would force Venezuela to source them from elsewhere, potentially requiring transactions in cash, a resource that is scarce in Venezuela, according to Grais-Targow. They've come to rely on the cheap and extra heavy crude found in Venezuela. The timelines for TransCanada Corp.'s Keystone XL and the Canadian government's Trans Mountain expansion - which would add a combined 1.42 million barrels of egress - are both farther out and less certain, due to legal and regulatory snags.

The problem is that even though U.S. oil production has skyrocketed to record highs, America is not self-sufficient.

The "NDTV" had reported: "The South American country's known reserves grew between 2009 and 2010 by 40 percent, compared with the stagnation of Saudi Arabia's reserves, which OPEC figures to be 264.52 billion barrels".

Other industries that rely heavily on oil may feel impacts. "The airlines and the trucking companies will lose a bit because they'll be paying more for fuel".

But McMonigle, now senior energy policy analyst at Hedgeye Potomac Research, believes Trump is very likely to impose sanctions.

Analysts said tough USA penalties on Venezuela's oil industry would be bullish for prices.

The biggest US refiners are expected to report strong fourth-quarter earnings thanks to profits from diesel processing in a strong USA economy, as well as a drop of about 40 percent in crude prices.

Venezuela's other leading oil customers are China and India.

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