Published: Mon, January 28, 2019
Money | By Bruce West

Venezuelan unrest shoves aside USA supply surge as oil climbs

Venezuelan unrest shoves aside USA supply surge as oil climbs

Oil futures split paths on Thursday, with USA prices settling higher and the global benchmark logging a slight loss as traders reacted to a weekly surge in US crude stockpiles and the possibility of US sanctions on Venezuelan crude amid intensifying political tensions in the South American nation.

Earlier, oil hit a session high of $61.38 after the United States said it could impose sanctions on Venezuela's crude exports as the Latin American country descends further into turmoil.

Weighing on oil futures, US crude inventories sharply rose by 8 million barrels last week, the Energy Information Administration said on Thursday, versus forecasts for a decline of 42,000 barrels. But that's all expected to change this year as gasoline stockpiles surge, and a shortage of heavy crude from Venezuela wouldn't make refiners' lot any easier.

Sanctions could also include USA exports of petroleum products to Venezuela, used for blending with Venezuelan heavy crude.

This year, the EIA expects USA production to grow by 1.7 million bpd, with the rise slowing down further in 2020 to 1.2 million bpd, the agency said in its latest Short-Term Energy Outlook released last week. 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. US crude stockpiles rose the most since November last week and gasoline inventories climbed to a record, government data showed on Thursday.

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Quoting the Annual Statistical Bulletin of the Organization of the Oil Exporting Countries (OPEC), the "NDTV" had stated that Venezuela had 296.5 billion barrels of oil under its control.

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U.S. crude oil refinery inputs decreased during the week ending January 18, the U.S. Energy Information Administration (EIA) said on Thursday.

But the rally has eased on fears that weakening global growth, and an exacerbation of China's slowdown amid a trade conflict with the USA, will curb oil demand. Production of heavy crude in Mexico has been declining, and although there is a strong supply in Canada, there are challenges to getting that crude to the Gulf Coast refineries.

RBC Europe predicted that USA sanctions could almost double projected output shortfalls from Venezuela.

US Baker Hughes will publish its oil rig count later in the day.

EIA reported a almost 8M barrel build during last week.

Other industries that rely heavily on oil may feel impacts. Refineries operated at 92.9 percent of their operable capacity. 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", Tran and fellow RBC analyst Helima Croft wrote in a note.

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