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Oil stable as economic outlook weighs, Venezuela concerns support

Published 30/01/2019, 01:22
© Reuters. Lease Operator Jon Pearson inspects a wastewater injection well owned by Parsley Energy in the Permian Basin near Midland
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By Henning Gloystein

SINGAPORE (Reuters) - Oil prices were stable on Tuesday, pressured by a cloudy outlook for the global economy but supported by worries over disruptions to supply from U.S. sanctions on Venezuelan exports.

U.S. West Texas Intermediate (WTI) crude futures were at $53.28 per barrel at 0111 GMT, 3 cents below their last settlement.

International Brent crude oil futures were 1 cent above their last close, at $61.33 per barrel.

This followed a 2-percent price jump the previous session, when markets first digested the U.S. sanctions on Venezuela's oil exports.

Washington on Monday announced export sanctions against Venezuela's state-owned oil firm PDVSA, limiting transactions between U.S. companies that do business with Venezuela through purchases of crude oil and sales of refined products.

The sanctions, aim to freeze sale proceeds from PDVSA's exports of roughly 500,000 barrels per day (bpd) of crude oil to the United States. They are the toughest U.S. financial challenge yet to Venezuela's embattled socialist president, Nicolas Maduro.

The step pushed up oil prices on Monday, but markets appeared more relaxed on Tuesday as the sanctions only impact Venezuelan supply to the United States.

"The (Venezuelan) export volumes will not be eliminated from the market, but rather rerouted to other countries," said Paola Rodriguez-Masiu, an analyst at consultancy Rystad Energy.

With the United States dropping out as a customer for Venezuelan oil, she added that "China and India ... will be able to pick up these oil volumes at great discounts".

Other analysts also pointed to global economic weakness as countering supply-side concerns such as the voluntary supply restraint by the Organization of the Petroleum Exporting Countries (OPEC), which started late last year in a bid to tighten the market and prop up prices.

"The Venezuelan political crisis as well as a Saudi pledge to lower output further should have boosted crude oil, but pulling in the opposite direction are heightened concerns about global growth, particularly that of China," said Ole Hansen, head of commodity strategy at Denmark's Saxo Bank.

© Reuters. Lease Operator Jon Pearson inspects a wastewater injection well owned by Parsley Energy in the Permian Basin near Midland

Global economic growth and fuel consumption are expected to slow this year amid a trade dispute between the United States and China, the world's two biggest economies.

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