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Oil prices slide on swelling U.S. supply, global market slump

27 January, 2019, 15:43 | Author: Lawrence Cooper
  • U,S, crude price rises, boosted by Venezuela turmoil

On Friday, oil prices gained as concerns over tighter global supply amid the threat of US sanctions on Venezuelan oil sector outweighed surging USA stockpiles.

US crude oil production remained near a record high level of 11.9 million barrels per day for the week ending January 18, EIA data showed on Thursday.

According to the Weekly Petroleum Status Report, U.S. crude oil imports averaged 8.2 million barrels per day last week, up by 664,000 barrels per day from the previous week, while crude oil exports averaged 2 million barrels per day last week, down by 931,000 barrels per day from the previous week.

As tensions between the administration of Venezuelan President Nicolas Maduro and the self-proclaimed interim president Juan Guaido continue, officials and experts worldwide have voiced their concerns over the situation, appealing for dialogue while calling for the issue to be resolved without outside influence.

Russian oil giant Rosneft has also marketed its ESPO grade more aggressively, signing new long term supply deals with state oil companies such as ChemChina and PetroChina.

US refineries that depend on Venezuela's heavy crude would have even more trouble securing supplies as Canadian and Mexican crude are often not as discounted and are limited in availability.

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Full year Iranian imports dropped to 29.274 million tons, or 585,475 bpd, down 20 percent from 2017 after the United States imposed sanction on Tehran over its disputed nuclear program. WCS prices jumped sharply after Alberta Premier Rachel Notley ordered a production cut of 325,000 b/d to drain the excess supply from the system in December.

Gasoline stocks rose for the eighth straight week to a record 259.7 million barrels, as demand for the fuel over the past four weeks fell 0.1% from a year ago.

Although, it is worth pointing out that if the US-China trade war talks do not make any headway, sentiment could quickly sour and cause fears over slowing economic growth to resurface.

Still, the long-term trend is a declining dependence on Venezuelan oil.

“Venezuelan production will decline by an additional 300,000-500,000 barrels per day (bpd) this year but such punitive measures could expand that outage by several hundred thousand barrels.”.

Shipments to the United States account for about 75 percent of the cash Venezuela gets for crude shipments, according to a Barclays research note published last week. One proposal would see Washington declare that any payment to Venezuela in return for oil must go to the new government, or perhaps some form of humanitarian account to help feed the country's starving people. The state-owned company owes China US$17-billion and is behind on its payment, so any effort to divert its exports to that market may not yield the company any revenue.

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