Oil climbs on Venezuelan crisis despite surging U.S. supply

Oil climbs on Venezuelan crisis despite surging U.S. supply

Oil climbs on Venezuelan crisis despite surging U.S. supply

Oil prices declined on Thursday amid lingering concerns over slowing global economic growth that may limit fuel demand and after a surprise build in US crude inventories.

At 445 million barrels, these were about 9 percent above seasonal limits, the authority said, a day after the American Petroleum Institute estimated inventories had risen by 6.55 million barrels, which apparently surprised market players, as do most API weekly inventory releases these days.

Full export pipelines were blamed for a glut of oil in Western Canada last fall that led to large discounts for bitumen-blend Western Canadian Select crude compared with NY benchmark West Texas Intermediate.

Venezuelan oil is predominantly heavy crude, which requires extensive refining, and as such, is frequently blended with lighter crudes to give refiners higher-value products.

Oil prices fell on Monday after US energy firms added rigs for the first time this year in a sign that crude production there will rise further.

US refineries that depend on Venezuela's heavy crude would have even more trouble securing supplies as Canadian and Mexican crudes are often not as discounted and are limited in availability. 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.

Global oil markets are facing an uncertain year with slowing global growth driving less global demand for oil while the supply picture looks unclear with production cuts by OPEC and Russian Federation potentially counteracted by the growth in US shale oil output. If the Trump administration pulls the trigger on energy sanctions, those declines could balloon to several hundred thousand more barrels, says Helima Croft, global head of commodity strategy at RBC.

"It will be costly for Venezuela but eventually they'll be able to sell that oil to Asia at a discount".

The oil executive also underscored "difficult access to water, and electricity" in Venezuela.

Trump has been a wild card for the oil market for the past year. That gentle approach left the oil market oversupplied, helping to send prices tumbling.

"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. Those sanctions faced opposition from Republican lawmakers representing Gulf Coast states, where refineries process heavy crude into fuels.

After Maduro broke off relations with the USA, the US threatened to impose sanctions on Venezuelan oil.

But concern about the supply of heavy crudes is apparent in the US physical market, where the price for Mars Sour WTC-MRS , a medium crude, shot to its highest since early 2011. The economic relationship between the two nations is being brought into focus as there may possibly be a U.S. embargo against Venezuelan oil.

The "NDTV" had reported: "The South American country's known reserves grew between 2009 and 2010 by 40 percent, compared with the stagnation of Saudi Arabia's reserves, which OPEC figures to be 264.52 billion barrels".

And Venezuela relies on United States products to keep its oil industry afloat. Refineries operated at 92.9 percent of their operable capacity. “In the event that a reformist government comes to power, the road back for Venezuela will be extremely arduous given the depths of the economic and humanitarian disaster.

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