Potential Venezuelan oil sanctions could impact Louisiana

Potential Venezuelan oil sanctions could impact Louisiana

West Texas Intermediate crude for March delivery added 51 cents to close at US$53.13 a barrel on the New York Mercantile Exchange.

The global benchmark was at $60.86 a barrel at 1230GMT, a 0.4 percent loss, closing the previous session at $61.09 per barrel.

In Caracas, Venezuelan President Nicolas Maduro and Juan Guaido, the opposition leader, gave dueling speeches.

According to EIA's Annual Energy Outlook 2019 released on Thursday, the US position as a net energy exporter would remain from 2020 through 2050 as a result of large increases in crude oil, natural gas, and natural gas plant liquids production coupled with a slow growth in USA energy consumption.

Traders paid a close eye on USA threat of sanctions on Venezuela, which would lead to a tighter market. Global benchmark Brent crude, which is less affected by Venezuela than the USA grade, slipped 5 cents to US$61.09 on the London-based ICE Futures Europe exchange and commanded a US$7.96 premium to WTI. The economic relationship between the two nations is being brought into focus as there may possibly be a U.S. embargo against Venezuelan oil.

Venezuela's oil exports to the United States remain the primary cash resource for its state-owned oil company, and efforts by the United States to cut off that revenue would likely force it to send crude to China, India or other Asian countries.

Fundamentally, however, global oil markets are still well supplied, thanks in part to surging output in the United States, where crude production rose by more than 2 million barrels per day (bpd) past year to a record 11.9 million bpd.

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With the build, US crude stockpiles are now about 8% above the year-ago level and 2.8% above the five-year norm, analysts at PVM Oil Associates said in a Friday note. 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. OPEC's latest production cuts tightened the supply of heavy crude from Saudi Arabia.

The output surge has swollen USA fuel stocks, and crude inventories rose by eight million barrels earlier, according to official data released on Thursday.

A trade dispute between the U.S. and China and tightening financial conditions around the world have hurt manufacturing activity in most economies and dragged China's growth last year to the weakest in almost 30 years.

Still, some analysts said the possibility of immediate sanctions were unlikely. Some processors anxious about restrictions experimented with alternatives past year before ultimately returning to Venezuelan crude.

"While the current state of affairs is price constructive for oil, the market is hesitant when it comes to the global outlook", Harry Tchilinguirian, global head of commodity markets strategy at BNP Paribas, told the Reuters Global Oil Forum.

"The crude market is now focusing on global growth concerns primarily ..."

With the USA considering sanctions against Venezuelan crude, there's little doubt that Gulf Coast refiners would look north to Canada to fill the gap. That's because Venezuela's oil shipments to China and Russian Federation are usually taken as repayment for billions of dollars in debts.