Markets

Venezuelan oil giant PDVSA to redirect exports to customers in Europe, Asia

Venezuelan oil giant PDVSA to redirect exports to customers in Europe, Asia

Oil prices fell sharply today as a report showed a rise in USA inventories and fears about the impact of sanctions on Venezuela started to fade. Stocks gained by 1.3 million barrels in the week ended February 1, compared with analysts' expectations for an increase of 2.2 million barrels.

However, Venezuela's woes assuaged traders' mounting fears to a degree, with the USA sanctions limiting oil transactions between the Bolivian republic and other countries, and the European Union considering imposing more sanctions on the government of president Nicolas Maduro.

US West Texas Intermediate (WTI) futures were at $55.13 per barrel, down 13 cents, or 0.24 percent, from their last settlement.

The American Petroleum Institute reported late Tuesday that USA crude inventories rose by 2.5 million barrels last week at a time of weakening global demand, Morning Star reported.

USA oil imports from Opec countries have dropped to five-year lows as the oil producing cartel cuts output, while U.S. domestic production grows.

The January decrease was the largest in the past 12 months as Opec cut production in response to falling oil prices.




Echoing the view, Sukrit Vijayakar of Trifecta Consultants added that prices are unlikely to spike as the U.S. does not want crude oil prices to rise and as shale producers respond to the price rise by pumping more.

Brent crude futures rose 62 cents, or 1 percent, to $62.60 a barrel by 11:33 a.m. EST (1633 GMT).

"Cutting out Venezuela from the global oil markets would provide a short term positive strength to oil prices, but its significance would be limited", said Mihir Kapadia, chief executive of Sun Global Investments.

With fresh sanctions potentially looming, a flotilla loaded with about 7 million barrels of Venezuelan oil has formed in the Gulf of Mexico, some holding cargoes bought ahead of the latest USA sanctions and others whose buyers are weighing who to pay, according to traders, shippers and Refinitiv Eikon data. Many U.S. refineries are created to run heavier, sour grades of crude, a good portion of which comes from Venezuela.

Venezuela, like fellow OPEC members Iran and Libya, was exempt from production curbs under the OPEC+ deal on expectations that its output faced involuntary downward pressure in 2019.

Also dampening market sentiment still were worries about weaker global economic growth and the US-China trade dispute. Buyers were also encouraged to shed long positions on renewed concerns over lower demand due to the slowdown in China's economy amid uncertainty over U.S. Senior U.S. and Chinese officials are poised to start another round of talks next week.


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