Sanctions on Venezuela would reroute crude, leave refiners short

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

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

Prices got more support from expectations USA crude stockpiles fell last week, and official data indicated slowing growth in US shale oil output in coming years.

Even news of possible USA sanctions against Venezuela - a development that ought to push oil prices higher - didn't help crude prices rebound.

"We expect USA crude oil prices to range between $50-$60 per barrel in 2019 and about $10 more per barrel for Brent", Tortoise Capital Advisors said in its 2019 oil market outlook.

Brent crude oil futures were at $60.86 a barrel at 1215 GMT, down 23 cents, or 0.38 percent.

Amid violent street protests, Venezuela's opposition leader Juan Guaido declared himself interim president this week, winning recognition from Washington and parts of Latin America.

Meanwhile, the United States last November re-imposed sanctions against Iran's oil exports.

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.

In the previous week ending January 11, API reported a decrease of 0.56 million barrels in the USA crude oil inventories.

Such rehabilitation could frustrate Saudi Arabia's desire to keep world markets in equilibrium by adding more supply just as a weaker economy looks to curb demand growth.

The launch of the mechanism would allow the European Union to “skirt” US sanctions, but that may have been “offset by reports that the Trump administration is telling energy companies that they should get prepared for sanctions on Venezuela, ” said Flynn.

"Forcing Venezuela into the spot market to dump prompt crude puts them in a corner".

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A report from Rystad Energy says that USA oil production is likely to increase in the coming years.

Refineries along the Gulf Coast are set up to process heavy crude and they may end up spending more money buying it elsewhere.

Oil prices inched up on Tuesday amid supply cuts by producer club OPEC and Russian Federation, although the darkening economic outlook capped gains.

"Chevron operations in Venezuela continue and the company is committed to the country's energy development in compliance with all applicable laws and regulations", Chevron said in a statement.

If Nymex crude oil prices offer a handy way to take the market's temperature on Venezuela, the two margins above tell the story beneath the story.

Analysts also pointed to a surprise increase in United States crude stocks after refineries cut output, according to industry data.

At the end of September, only 25 wells were in operation, compared with nearly 70 in early 2016 according to the U.S. Energy Information Agency (EIA).

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 previous year.

A possible move by President Donald Trump to hurt Venezuela's oil industry could prove a shot in the arm for the Xi Jinping and Narendra Modi administrations. 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.

"The breakdown in diplomatic relations was interpreted as upping the possibility of a US sanction on Venezuelan oil that would likely force USA refiners to seek alternative supplies at higher prices, hence the WTI gains", Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

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