Venezuela Only Poses Downside Risks for Oil Prices

Venezuela Only Poses Downside Risks for Oil Prices

The U.S. imported about 17.7 million barrels of crude oil and petroleum products from Venezuela in October 2018, according to the Energy Information Administration .

Oil prices rose by 1 percent on Friday as turmoil in Venezuela triggered concerns that its oil exports could soon be disrupted, Trend reports citing Reuters.

Crude inventories rose by 6.6 million barrels in the week ended January 18 to 443.6 million, compared with analysts' expectations for a decrease of 42,000 barrels.

"If oil prices continue to go up, it becomes a domestic political issue that the Trump administration does not want to deal with", Michael Shifter, president of the Washington think tank Inter-American Dialogue, told The Washington Times. The West Texas Intermediate for March delivery fell 39 US cents to settle at 52.57 dollars a barrel on the New York Mercantile Exchange, while Brent crude for March delivery slid 36 cents to close at 61.14 dollars a barrel on the London ICE Futures Exchange.

Venezuelan President Nicolas Maduro counts on support from the army to counter-balance worldwide backing for parliament speaker Juan Guaido, who has proclaimed himself interim president.

Refining output pulled back in the most recent week after a period where refineries have been running at high capacity to meet seasonal needs for diesel and heating oil and to feed export demand.

The European Union is expected to launch a mechanism that would facilitate nondollar trade with Iran, circumvent USA sanctions, Reuters reported Wednesday , citing comments from diplomats.

Geneva-based Petro-Logistics said on its website that Iranian crude and condensate exports in December "fell steeply" from November to less than 1 million barrels per day (bpd) due to USA sanctions - lower than some other estimates.


Still, some analysts said the possibility of immediate sanctions were unlikely.

"The stock market probably responds mildly", Fitzmartyn said.

If there is regime change in Venezuela, oil production could ramp up to more traditional levels and that might come to weigh on oil prices, Johnston said.

"They were getting most of their heavy crude from Venezuela and Mexico - and a little bit from Canada". Prices increased significantly when the province imposed mandatory crude production cuts for 2019. Valero and Citgo are among the largest importers of Venezuelan crude.

Total products supplied over the last four-week period averaged 20.3 million barrels per day, down by 1.1 percent from the same period past year.

And Venezuela relies on United States products to keep its oil industry afloat.

"With the IMF downgrading 2019/20 and the continued rhetoric from Davos reiterating that they expect global growth to slow down over the next two years, is providing selling pressure in oil", said Hue Frame, portfolio manager at Frame Funds in Sydney. Mars traded at a $7.10 premium to USA crude on Thursday, a five-year high, according to Refinitiv Eikon data, as bidders came into the market to secure supplies through the second quarter, traders said. That's bad news for refiners on the U.S. Gulf Coast, but good news for Saudi Arabia, Iraq and other heavy-crude producers. While a cutoff of Venezuelan imports would raise prices for refiners in the Gulf Coast, the market is competitive enough that producers are unlikely to pass along much of the cost to consumers, experts said. WTI futures closed up 1 percent on Thursday.

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