Oil falls 1 percent as supply concerns fade

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Guaido's team is planning for a post-Maduro government with an emergency scheme to supply fuel domestically, given widespread shortages across Venezuela, Goicoechea said.

A flotilla loaded with about seven 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 whom to pay, according to traders, shippers and Refinitiv Eikon data.

Although Venezuelan crude is attractive for India's private refiners, like Nayara Energy and Reliance Industries, which are equipped to refine the heavy crude from the sanction-ridden country, concerns over reliability of delivery poses a major challenge.

An oil pumpjack and a tank with the corporate logo of state oil company PDVSA are seen in an oil facility in Lagunillas, Venezuela January 29, 2019.

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The head of state-run Kuwait Petroleum Corp, Hashem Hashem, said on Tuesday that global oil supply could be hit this year by big reductions in exports from Venezuela.

However, a stronger United States dollar limited gains on Wednesday.

Adding to the worries of the South American country, the U.S. administration has halted shipments of naphtha bound for Venezuela, which would result in a further fall of production in the country.

Two-thirds of the total volume in the SPR is sour crude.

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Markets Underpinned by Sanctions and Production Cuts...

... In January 2019, the country's production was at around 1.15 mln bpd. We were exporting about 500,000 bpd to the US. 500,000 barrels per day. PDVSA has said it would take legal action to block a takeover.

"Anyway, Russia and China don't care about USA sanctions", he added. However, given the current state of trade talks with Washington, Beijing might not seize the opportunity as it could potentially jeopardise negotiations, Commerzbank report noted.

At the moment the barrel of WTI is down 1.41% at $52 and a breakdown of $51.13 (low Jan.28) would aim for $50.83 (55-day SMA) and then $50.34 (low Jan.14).

This news may have been offset by robust U.S.jobs data and a stronger-than-expected ISM Manufacturing PMI report on Friday, but traders turned bearish on Monday when the government reported that new orders for USA -made goods unexpectedly fell in November amid sharp declines in demand for machinery and electrical equipment, suggesting a slowdown in manufacturing as 2018 ended.

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In an interview aired by private broadcaster Televen, Manuel Quevedo, also president of the oil company, commented on USA sanctions imposed last week on PDVSA and its US subsidiary Citgo.