Oil rises as traders wait for supply breaks in Venezuela following US sanctions

SINGAPORE (Reuters) – Oil prices rose on Wednesday, concerns over supply cuts following US sanctions against the Venezuelan oil industry offsetting downward pressures resulting from the darkening prospects for the global economy.

The WTI (West Texas Intermediate) futures price was $ 53.54 per barrel at 0455 GMT, up 23 cents (0.4%) from their latest settlement.

Brent international crude futures rose by 37 cents or 0.6% to $ 61.69 a barrel.

The gains followed a 2% jump in prices in the previous session, when markets first digested US sanctions on Venezuelan oil exports.

Washington on Monday announced export penalties against the state-owned petroleum company Petroleos de Venezuela SA (PDVSA), restricting transactions between US companies that do business with Venezuela through crude oil purchases and sales of refined products.

"Sanctions so far have mostly disrupted refiners on the US Gulf Coast, who are forced to look for other sources of heavy crude oil and have increased their purchases in Canada," said Vandaana Hari of Vanda Insights, a privately owned company. energy consulting.

She added, however, that Canadian oil exports would be "limited by the bottlenecks in pipeline capacity.

The sanctions are intended to freeze the proceeds from the sale of PDVSA's exports of approximately 500,000 barrels of crude oil per day to the United States.

Although this measure led to higher oil prices, the markets appeared relatively relaxed, with sanctions only affecting Venezuela's supply to the United States.

"Export volumes (Venezuelans) will not be eliminated from the market, but will be redirected to other countries," said Paola Rodriguez-Masiu, an badyst at Rystad Energy.

With the withdrawal of the United States as a customer for Venezuelan oil, she added that "China and India … will be able to recover these volumes of oil at very advantageous prices".

Despite this, some badysts have said that non-US oil trading companies based in the US could still avoid dealing with Venezuelan oil.

The Schork Report, a daily publication on oil and gas trading, said Wednesday that many "international oil traders … have major trading operations in the United States … At least in the short term, these traders will definitely stop buying in Venezuela until they are badured not to evade US sanctions. "

Commercial conversations

Other badysts have also pointed to economic weakness as a way of countering efforts to tighten the market, such as the voluntary restriction of supply by the Organization of Petroleum Exporting Countries (OPEC).

"Shooting in the opposite direction (oil prices) is causing growing concern for global growth, especially China's growth," said Ole Hansen, head of product strategy at the Danish bank Saxo Bank. .

Global economic growth and fuel consumption are expected to slow this year due to a trade dispute between the United States and China, the two largest economies in the world.

Officials from Washington and Beijing are expected to launch Wednesday a new round of trade talks aimed at resolving their disputes amidst which both sides have imposed heavy import taxes on their goods.