Markets

Venezuela Oil Woes Add Urgency to Canadian Pipeline, Rail Plans

Venezuela Oil Woes Add Urgency to Canadian Pipeline, Rail Plans

Oil prices were pressured by a weekly report from the American Petroleum Institute (API) that said USA crude inventories rose by 5.4 million barrels in the week to November 30, to 448 million barrels, in a sign that US oil markets are in a growing glut.

This development is against $60.90 recorded on Tuesday over fears of excess supply from non-OPEC member nations.

With Iran already crippled by US sanctions, a drop in Venezuelan exports could squeeze global supply further.

Brent crude oil futures were at $61.51 a barrel, up 42 cents. -China trade dispute and broader gloom over world economic growth put a check on prices.

Exports in December fell 3.8 per cent from a year earlier, Ministry of Finance (MOF) data showed on Wednesday, bigger than a 1.9 per cent drop expected by economists in a Reuters poll.

Diplomatic relations between USA and Venezuela have hit a new low over President Donald Trump's decision to recognize the leader of the South American country's opposition as its legitimate president.

But concern about the supply of heavy crudes is apparent in the US physical market, where the price for Mars Sour, a medium crude, shot to its highest since early 2011.

But U.S. President Donald Trump threatened on Tuesday to place "major tariffs" on Chinese goods imported into the United States if his administration didn't reach a desirable deal with Beijing.

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With Iran already crippled by US sanctions, a drop in Venezuelan exports could squeeze global supply further. "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".

Geneva-based Petro-Logistics said on its website that Iranian crude and condensate exports in December "fell steeply" from November to less than 1 million barrels per day (bpd) due to USA sanctions - lower than some other estimates.

But McMonigle, now senior energy policy analyst at Hedgeye Potomac Research, believes Trump is very likely to impose sanctions.

The bank cut its 2019 average Brent forecast to 70 dollars a barrel, from 72 dollars previously.

Investors at present perceive oil supply to be fairly tight relative to demand, but given concern over the longer-term outlook for global economic growth, bullish drivers have been short-lived in the last couple of weeks.

Demand may start to stutter because of a global economic slowdown, which is likely to dent fuel consumption.

A trade dispute between the U.S., China and tightening financial conditions around the world have hurt manufacturing activities in most economies and dragged China's growth in 2018 to the weakest in almost 30 years. -China trade war escalated.