What a Venezuelan oil embargo could mean for US

BC-Venezuela’s-in-Crisis The-Oil-Market-Doesn’t-Care

Oil prices fell slightly on Friday as concerns about US-China trade talks and fresh data on surging US fuel stocks sent a chill through markets.

American benchmark West Texas Intermediate (WTI) was trading at $53.05 a barrel at the same time on Friday for a 0.2 percent loss, ending the previous day at $53.13 per barrel.

The driver of Friday's trading activity was said to be the US signalling that it may impose sanctions on Venezuelan exports after recognizing opposition leader Juan Guaido as interim president this week, prompting president Nicholas Maduro to cut ties with Washington. On Wednesday, Venezuelan opposition leader Juan Guaido declared himself interim president on Wednesday, winning over the backing of the Washington and many Latin American nations and prompting socialist incumbent Nicolas Maduro to break relations with the U.S.

Brent crude oil futures were at $61.17 a barrel at 0955 GMT, up 8 cents, or 0.13 percent. Meanwhile, other forecasts, from the IEA and OPEC, also see USA oil leading the rise in supply this year, but they also see global demand stable at 1.3 million and 1.4 million bpd, respectively, a slowdown from 2018 but not a too significant one.

The oil-sands industry has been ramping up shipments of crude by rail at a breakneck pace, with individual producers striking deals to load more oil on trains and Alberta's government buying rail cars to increase capacity. A report from the American Petroleum Institute on Thursday said that the USA has surplus gasoline stockpiles that "could approach burdensome levels" and force gas prices down further.

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"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", it said. The threat to reduce supplies supported futures prices.

WTI met some fresh buying interest earlier in the day on rumours that the United States could impose sanctions on Venezuelan oil exports in response to the rising social turmoil in the Caribbean country.

However, this bullish view is eclipsed by the above mentioned possibility of a slowdown in the global economy and fears of a supply glut on the back of increasing United States oil production.

After Maduro broke off relations with the USA, the US threatened to impose sanctions on Venezuelan oil.

The prospects of future oil demand are getting clouded by the global growth worries, analysts said. Venezuela's crude is so heavy it must be blended with naphtha, a liquid hydrocarbon mixture used to dilute oil so that it can be transported. Even if Maduro's government is replaced, "the road back for Venezuela will be extremely arduous given the depths of the economic and humanitarian crisis", RBC analysts Helima Croft and Michael Tran wrote in a note.

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