by Bloomberg|Sharon Cho|
Oil held losses near $52 a barrel as renewed concerns over slowing global growth outweighed new U.S. sanctions against Venezuela’s state oil company.
(Bloomberg) — Oil held losses near $52 a barrel as renewed concerns over slowing global growth outweighed new U.S. sanctions against Venezuela’s state oil company.
Futures rose 0.3 percent in New York after climbing as much as 1.1 percent earlier, following a 3.2 percent drop Monday. The Trump administration issued sanctions on Venezuela’s PDVSA that effectively block the regime of President Nicolas Maduro from exporting crude to the U.S. More U.S. companies warned of slowing growth in China and elsewhere on Monday, while additional trade talks between Washington and Beijing are scheduled for later this week.
Oil has rallied this year as the OPEC+ coalition started a fresh round of output cuts to ease a glut, with Saudi Arabia pledging to pump below the limit it agreed in December. Still, price gains have been capped by record U.S. output, expanding inventories and trade tensions with China. It’s still unclear what effect political turmoil in Venezuela will have on crude markets, Saudi Energy Minister Khalid Al-Falih said.
“The issues surrounding the Venezuelan situation have already been priced in to some extent” and the U.S. hasn’t called for wider sanctions such as those on Iran, said Sungchil Will Yun, a Seoul-based commodities analyst at HI Investment & Futures Corp. “Expectations for future demand are becoming a worry.”
West Texas Intermediate crude for March delivery rose 16 cents to $52.17 a barrel on the New York Mercantile Exchange at 7:33 a.m. in London. The contract fell $1.70, or 3.2 percent, to close at $51.99 a barrel on Monday.
Brent for March settlement added 16 cents to $60.09 a barrel on the London-based ICE Futures Europe exchange. It broke below $60 for the first time in almost two weeks on Monday, dropping $1.71 to $59.93. The global benchmark crude was at a $7.93 premium to WTI.
Sanctions on Venezuela
U.S. President Donald Trump assailed Maduro in a letter to Congress, explaining an executive order he issued sanctioning PDVSA and Venezuela’s central bank. The action will bolster the position of National Assembly leader Juan Guaido, recognized by Washington as Venezuela’s rightful president. Guaido said Monday he would take control of Venezuelan accounts abroad and appoint new boards to PDVSA and its Houston-based subsidiary Citgo Petroleum Corp.
The sanctions will see global oil flows re-routed. Refineries in China and India are the only ones that can process Venezuelan crude outside the U.S., Eurasia Group analyst Risa Grais-Targow, wrote in a note. PDVSA will have to “deeply discount” its oil to displace Middle Eastern crudes in those countries, she wrote.
Microchip-maker Nvidia Corp. and heavy-equipment giant Caterpillar Inc. were the latest companies warning of a gloomy demand outlook from China. American prosecutors filed criminal charges against Huawei Technologies Co., China’s largest smartphone maker, highlighting the hurdles that still remain before the U.S and China can reach a trade deal.
“Prices are fluctuating today as the market is trying to gauge the impact on oil markets if the U.S. sanctions on Venezuelan crude will continue in the long term,” said Hong Sungki, a commodities trader at NH Investment & Securities Co. in Seoul “But oil prices are expected to stabilize” as there’s unlikely to be a supply shock, he said.
SOURCE: RIGZONE.COM
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