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Oil markets are facing the threat to global oil reserves from Iran and Venezuela, with rising inventories in the United States easing worries about market tension.
The failed coup attempt in Venezuela triggered a series of criticisms, with US officials accusing Venezuelan army members of not being cold-footed, although independent analysts questioned whether the Trump administration had been confidence or trust in erroneous information. But the story is not over and Trump's top officials, especially National Security Advisor John Bolton, are determined to overthrow President Maduro.
The turmoil is expected to continue and the failure of the coup attempt earlier this week complicates the task of Venezuelan opposition. As instability continues, Venezuelan oil production, which is already in decline, is likely to be further disrupted.
In fact, the failure of Juan Guaidó and the setback of one of the main offensives of the Trump government's foreign policy probably mean that Washington will only degenerate. "The White House will likely seek to further erode the country's oil export earnings by forcing consuming countries like India to limit their purchases to Venezuela," RBC Capital Markets said in a note. "Washington can also demand that US energy companies stop operating in the country and that European companies stop providing diluent and other services to PDVSA (Venezuelan state oil company)." Related: economists: rising oil prices will remain
According to RBC, Venezuelan oil production could even be reduced to zero by the end of the year. This seems unimaginable, but according to RBC, Maduro said: "This is entirely plausible, given the substantial support Maduro receives from Moscow and the fact that junior officers have been the main defectors." As Maduro remains in power, Washington will tighten ties, which could jeopardize all Venezuelan oil exports.
The Venezuelan oil sector continues to decline and its free fall was significant even before this week's coup attempt. "In Venezuela, production is only about 800,000 barrels a day. It has fallen by nearly 400,000 barrels a day in just three months and is expected to fall further, "Commerzbank wrote in a note on Thursday.
Some analysts have argued that a quick fix in Venezuela (which seems unlikely at the moment) would be bearish for oil, as it could halt the decline of the country's oil sector. However, the considerable damage to infrastructure, oil installations and the extreme lack of investment would make any reversal extremely difficult and ultimately a long-term project. "[W]e do not think that a change of regime in Venezuela will lead to a significant increase in production in the medium term; the problems are too deep to be solved instantly, "Standard Chartered writes in a note.
Yet, despite all this chaos, oil prices fell sharply on Thursday, with oil traders seemingly more focused on rising US stocks than the mess in Venezuela. Inventories in the United States jumped 10 million barrels, suggesting that the oil market is tightening. Related: A billion dollars in Iranian oil stuck in Chinese oil center
"Among this host of bullish catalysts is a pocket of weakness that is deepening: US oil stocks are swelling due to rising inventories of crude," Stephen Brennock, an analyst at PVM Oil Associates Ltd., told Bloomberg.
The increase in inventories and the fall in oil prices should dispel much pressure on OPEC +, which only has a few weeks to decide whether to extend the reduction agreement or not. the production. Less than two weeks ago, the United States announced its decision to let all Iran 's sanction waivers expire, which quickly focused on the reaction of the United States. OPEC +. The US government said it had received assurances from Saudi Arabia and the United Arab Emirates to offset the disturbances.
It is difficult to avoid the conclusion that Iran and Venezuela will indeed experience serious breakdowns in the coming months. This should significantly tighten the oil market, despite the recent increase in US stocks. However, with oil traders currently discounting the supply risk, OPEC + has room for maneuver and may decide to maintain budget cuts beyond June in order to avoid further declines in oil prices. price.
By Nick Cunningham from Oilprice.com
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