Oil prices unlikely to rise far on Venezuelan turmoil
Oil prices will likely rise when benchmark futures begin trading again amid concerns that supply may be disrupted after the United States kidnapped Venezuelan President Nicolas Maduro from Caracas over the weekend.
But analysts said there is ample supply of oil on global markets, meaning further disruptions to Venezuelan exports would have little impact on prices.
The US attack on Venezuela to remove the country’s president did not cause any damage to the country’s oil production and refining industry, two sources with knowledge of the operations of state oil company PDVSA said over the weekend.
Exports have fallen since US President Donald Trump last month imposed a blockade on sanctioned oil tankers entering or leaving Venezuelan waters and seized two cargoes, and have been completely paralyzed since January 1.
This led to millions of barrels remaining on loaded tankers in Venezuelan waters and millions more ending up in Venezuelan oil depots.
The OPEC member’s exports fell to around 500,000 barrels per day in December; that was about half as much as in November.
Most of December’s exports occurred before the embargo.
Since then, exports from Venezuela have continued at around 100,000 barrels per day from Chevron alone.
The global oil giant has the US authority to produce and export from Venezuela despite sanctions.
The embargo led PDVSA to cut oil production because Venezuela had run out of storage capacity for oil it could not export, three sources familiar with the decision said on Sunday.
Sources said PDVSA has asked some joint ventures operating in the country to reduce production.
They will need to shut down oil fields or well clusters.
Trump said Saturday that the oil embargo on Venezuelan exports remains in full effect.
If the U.S. government loosens the embargo and allows more Venezuelan crude oil exports to the U.S. Gulf, there are refineries there that previously processed the country’s oil.
Neil Shearing, group chief economist at Capital Economics, said the weekend’s events were unlikely to materially change global oil markets or the global economy, given that US strikes have hampered Venezuela’s oil infrastructure.
“In any case, any short-term disruption in Venezuelan production would be easily offset by increased production elsewhere. And any medium-term recovery in Venezuelan supply would be dwarfed by changes among major producers,” he said in a note.
Trump also threatened on Friday to intervene in protests in Iran, another OPEC producer, that has increased geopolitical tensions.
On Friday, the US president said “we are locked in, loaded and ready to go”, without specifying what action he was considering against Iran, which has been in a week of unrest as protests against rising inflation continue across the country.
“Prices may see a modest rise due to rising geopolitical tensions and risks of disruption from Venezuela and Iran, but ample global supply should continue to limit these risks for now,” said Ole Hansen, head of commodity research at Saxo Bank.
The Organization of Petroleum Exporting Countries and its allies agreed on Sunday to maintain stable oil production in the first quarter, OPEC+ said in a statement.
Both Venezuela and Iran are members of OPEC.
Some other members of OPEC+ are also embroiled in conflicts and political crises.
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